People’s Bank would safeguard deprived area investment

People’s Bank would safeguard deprived area investment
Henry Palmer, Social Enterprise Mag
24.02.09


A People’s Bank could prevent financial services being withdrawn from deprived areas as the economic downturn takes hold, a powerful coalition of business groups, think tanks and unions will claim next month.


A report to be published by the Post Bank Coalition will outline its vision for a state-owned social enterprise bank, where profits are reinvested into improving services, rather than being paid out to external shareholders.


The coalition entered the limelight last month after submitting evidence to MPs investigating the future of the post office network. Political big hitters, including business secretary Lord Mandelson and Liberal Democrat deputy leader Vince Cable, have pledged their support to the proposals.


The coalition – whose members include the Federation of Small Businesses, the New Economics Foundation and the Communications Workers Union – will claim that the current banking crisis provides an opportunity to re-think how financial services are delivered to marginalised groups and enterprises.


In its evidence to the Business and Enterprise Committee, which scrutinises policy and spending by the Department for Business, Enterprise and Regulatory Reform (BERR), the Post Bank Coalition argued that a ‘Post Bank’ would not only help safeguard the future of Britain’s 14,000 post office branches, but would help reconnect banking with local communities.


An early draft of the report to be published next month, which has been seen by Social Enterprise, says: ‘They [banks] need to have the independence to be able to offer the services their local community requires… Crucially profits should be invested back into improving these local services, not siphoned off to pay dividends to shareholders.’


Elsewhere, the draft report says: ‘The Post Bank will break the current failed model of risk taking monolithic institutions by being publicly owned and locally based, with a diversity of services and partnerships such as credit unions and community development finance institutions (CDFIs) which currently work to provide personal and business finance to local communities.’


The report will also suggest this model has helped safeguard post office networks elsewhere in Europe. For example, the French postal service, La Poste, launched its bank in January 2006 and by 2007 this accounted for nearly a quarter of its turnover.


Likewise, the Italian postal service, Post Italiane, launched BancoPosta in 2000 and by 2002 it showed a net profit for the first time in 50 years.


Meanwhile, political support for a People’s Bank is gaining momentum. Vince Cable, deputy leader of the Liberal Democrats, told voluntary sector leaders last week that they would need to find ways to support the large swathes of the population who would be cut off from mainstream banks as a result of the credit crunch.


‘If Mandelson is able to get his state bank operating through the post offices it would be a great help and I’m in favour of that,’ he said in his keynote speech at the National Council for Voluntary Organisations annual conference in London.


The Post Bank Coalition will be publishing a full report about its proposals next month. For more information, visit www.neweconomics.org