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A new people's bank
Now is the time for an ethical bank that saves the Post Office and incorporates another state-owned institution – Northern Rock
In the turbulence all around us, MPs still have work to do. Many of us in the parliamentary Labour party have been fighting to stop Royal Mail being part-privatised and now, finally, we hope that the government has listened. We want the postal services bill to be put into the long grass, and we want the government to set a fresh and positive course by abandoning this divisive and unnecessary plan. Its hopeful demise shows the strength of backbenchers who in a cause. It is also, of course, a sign of the continuing recession: nobody was prepared to offer a decent price for a slice of this great national asset.
The next step, which will also score a much-needed goal for our government, is to help ordinary people get a decent, trusted bank that will abandon casino banking. We want a "people's bank" based on the Post Office network. I suggest that the popularity of this idea could be increased by incorporating Northern Rock – which the people already own – into the new Post Bank.
The government now has a perfect opportunity to restore some trust in the battered banking system – and as a side effect, in itself – by setting up a new kind of bank. We now own Northern Rock outright. Let's make it work properly for the people rather than being sold off to relieve the government of the charge that it is nationalising the banking system.
I believe the time is right for a people's bank to be established through the Post Office and for Northern Rock to be incorporated into it, thus providing at a stroke a banking licence, infrastructure and expertise to be added to the Post Office's already growing provision of financial services. The creation of a Post Bank would provide a sensible and logical economy of scope.
Here's why rather than selling Northern Rock to another conventional financial organisation – Virgin Money is apparently interested – the national interest would be much better served by integrating it into a nationally owned bank, not state-run nor shareholder-driven, but locally based, prudently managed, and responsible to a public interest trust as its governing body.
We desperately need a bank that can lend to business. Our recession cannot be overcome without this. Conventional banks that were credit-crazed between 2002 and 2008 are now trying to strengthen balance sheets, and lending to business has stalled. Structurally, high street banks are now badly designed to help small and medium-sized businesses – they are not locally based; they don't know their customers; they have computer systems which calculate lending on banks' terms.
Even when the European Investment Bank contributed €30bn to help small business at the end of last year, commercial banks simply either refused or did not have the local knowledge to publicise or hand over this money. A Post Bank, locally based, would be the perfect vehicle for this kind of scheme.
We also need to have a bank that will restore trust to the banking system. A "narrow" bank, one described by a former senior Bank of England executive as a "plain vanilla" bank, would steer clear of the casinos and do what banks used to – keep people's money safe, and lend prudently and knowledgeably.
And, finally, we need a bank that will take seriously the needs of the financially excluded. It's another government concern, and it's own taskforce advised the Chancellor before the last Budget that "recent pressures on the economy and the banking system will particularly affect the most financially vulnerable people".
For all these reasons, and also to strengthen the great Post Office network, we desperately need a Post Bank. To set this up we need to move fast. There could be no better use for Northern Rock than for it to be the building block for the new bank of the people.
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