Five questions answered on the Co-op Group’s banking losses

The Co-operative Group announced today heavy financial losses due to problems with its banking division. We answer five questions on the Co-op’s current financial woes.

What losses have the Group recorded?

The Group lost £559m in the first half of 2013, after writing off £496m in bad loans at The Co-op Bank.

These bad loans are mostly related to Britannia Building Society, which merged with the Co-op in 2009.

What other financial troubles does the Group face?

Including the write-downs, Co-op Bank alone reported a total loss of £709m.

It also faces a £1.5bn capital hole in its balance sheet. Regulators say it must fill the gap.

Were these losses anticipated?

Yes. Co-op Group chief executive, Euan Sutherland, who took over the role in May this year, said the Group faced "well-documented challenges”.

He added: "My first few months in the role have been focused on putting in place the recovery plan for the bank," he said, but warned there were "no quick fixes".

Niall Booker, the Co-op Bank's chief executive added: "The underlying issues in the results today are not new.”

How does the Co-op Bank plan to plug the £1.5bn capital hole?

In June this year the bank announced it had struck an agreement with the Prudential Regulation Authority, the bank regulator, to plug the hole, which includes plans for a stock market listing, measures to raise money from bondholders and the sale of its insurance business, planned for 2014.

What are the Co-op Bank’s future plans?

According to Booker:

 "We are now clearly focused on improving the capital position of the Bank... [and] at the same time, we have continued to lend, maintaining our focus on supporting our loyal customers, both in retail and through our continued focus on lending to small and medium-sized businesses."

The Co-operative Group announced today heavy financial losses. Photograph: Getty Images

Heidi Vella is a features writer for

Photo: Getty Images
Show Hide image

How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.