I published this video this morning. In it, I argue that the UK's banks are amongst its least popular businesses because they don't give a damn about their customers and provide a perfunctory service. The UK government could provide an alternative in that case – and did at one time, called the GiroBank. I suggest that Labour should get on and do this again.
The observant will notice that we are now giving more attention to the design of our YouTube thumbnails: they apparently have a big impact on traffic levels.
The audio version of this video is here:
The transcript is:
The UK government could create a state bank for us all to use.
It has, after all, already got its own bank for itself to use, that's the Bank of England, and it has got a savings bank, because that is exactly what National Savings and Investments is. That is a savings bank that holds well over £200 billion of deposits at any point of time, and which contributes to the funding of the government's so called national debt.
But it's not that type of bank that I'm talking about. I think the UK government should have a bank exactly like Lloyds and Barclays and NatWest and so on. Why? Well, because it did provide one of these banks once. It was called the GiroBank. I can well remember it when I was in my late teens and early twenties.
It provided a really useful service - a fairly basic banking facility, but which did include a bank current account, and a bank savings facility, which could of course be linked to NS& I now. It could provide a debit card and a credit card these days. And, perhaps quite crucially, it could provide mortgages.
And mortgages are a really important thing for a state to provide. In the USA, most people's mortgage is in some way or other backed by the US government, which might come as a surprise to the free marketeers of the UK, but they provide long-term fixed interest rate mortgages for people that does not leave them exposed to the shenanigans that the Bank of England have been using to impose a cost of living crisis on the UK.
But why do I want this bank? Well, most of all because I want there to be digital inclusion in this country. And right now there isn't. By digital inclusion, I mean that people actually will have a bank account that they can access. And if there was such an account for the millions of people who are currently unbanked in the UK, then it would be easier to pay benefits.
It would be also easier to ensure that people could access their money where they needed it.
And, this bank could become the centre of the bank hubs that I think should exist in every town and village in the UK so that there is a continuing presence of banks in our community, which I think is so important.
They could, of course, exist alongside post offices with which they could share premises.
Now, if we had such a bank, what we could ensure is that people would not be penalized in the way they are by the current banking system if they make a mistake and they have a low income and they run low balances in their account. We could ensure that the people who had these accounts were not subject to such forms of penalty that are imposed by profit maximizing banks.
And let's also be honest, such a bank would actually attract vast amounts of custom because, candidly, most of our High Street banks aren't really very interested in doing business with us.
They might want our credit card balances if we're heavily overdrawn so that they can exploit us with interest rates of 30 plus per cent or thereabouts a year, because that is nothing less than exploitation. But when it comes to the routine operation of a bank account, they're frankly utterly uninterested altogether in what we do.
And therefore, to have such a facility available would be really important.
This would make a difference to millions of people's lives. It would provide them with a secure form of banking arrangement that they need not worry about with regard to penalties and which would ensure that they actually do have a reliable way of accessing their funds paid to them by the government.
It would also make a difference by ensuring the continuity of banking in our communities. If Labour really worried about financial inclusion in our society, they would do this. And we'd all win.
As would the small business community as well, I suggest. Because this type of bank should also provide facilities to them and many of them find it very hard to get going with the bank right now.
This is a change for the better that Labour could deliver. I urge them to do so.
It happened before, as I say. The National GiroBank did exist until it was taken over by the Alliance and Leicester Building Society and eventually lost in one of the many banks that crashed in 2008. We could have it again. We need to commit to it. It needs to be nationalised. It needs to deliver a public service. It could become a public good. Labour could do this. I urge them to do so.
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Totally agree Richard.
It could also be built on a new (dare I say robust?!) digital platform rather than the rickety legacy platforms currently supporting our main banks and be there when/if they keel over.
That would be the aim…
Just don’t let Fujitsu bid for the software!
Or Infosys!
I’m wondering if widespread basic banking services is a public good in the economic sense of the phrase. It’s non excludable because the majority banks are required to offer basic accounts. It’s not quite non rivalrous though. The extra person in the queue, or that extra piece of plastic or computing time. That has to be considered when a new customer is added to the system. State ownership disney change that.
Why not? It knows who the unbanked are
Richard,
You have talked about how money is created by banks and The Government so surely we should all be able to benefit from ‘money creation’
As I have suggested before what about some sort of ‘Citizens Savings and Loan’ scheme with the right to save a certain amount of money at favourable rates and more importantly a loan facility with repayments either via benefits or PAYE.
While I dont think we need to spend to much time on this might I suggest
1. We need to look at what ‘National Insurance’ provides, and that should be some basic ‘Insurance’ cover against premature death and ill health
2. A mortgage which again includes some sort of insurance cover
3. A basic ‘open to all’ credit facility
4. It seems to be recommended that everyone should have at least 3 months wages in savings and ideally 6 so some sort of savings account that offers a very good rate for the equivalent of 3 months average wages and good for the next three months
Such a bank could also be used to encourage the take-up of government benefits, especially for pensioners. The BoE independence has to go, however. Note the following:-
“US investors triggered a major sell-off on Wall Street on Thursday set off by fears that the job market is cooling, manufacturing is slowing and the Federal Reserve has left cutting interests too late to head off a recession.”
https://www.theguardian.com/business/article/2024/aug/01/investors-trigger-major-wall-street-sell-off-recession
I did note it
I live near a little village deep in rural France. There are less than a thousand residents in the whole commune (the village and surrounding countryside). It has 2 banks. Both – like most French banks – are mutuals (owned by their customers, not shareholders). I understand in the UK the only big bank committed to keeping branches open is Nationwide – the only remaining big mutual bank there. Hmmm…
Hmmmm, indeed
Mr Cox,
This is Britain. Nothing is quite as it seems; naturally.
“Ads for Nationwide featuring actor Dominic West have been banned for misleading consumers into thinking that the bank – unlike its rivals – would not be closing its branches.
The Advertising Standards Authority (ASA) investigated the TV, radio and press ads, in which West plays the boss of a fictional rival of Nationwide, following 282 complaints.
One of those was from Santander, who understood that Nationwide had recently closed or reduced opening hours at a number of branches, and challenged whether the ads were misleading”. (ITV News)
We didn’t arrive here by accident. It is who we are; we just don’t like people reminding us.
An obvious question might be would Nationwide and/or The Post Office provide the High Street presence for this operation.
Interestingly enough when the other banks pulled out to its credit The Nationwide opened a branch in Glastonbury.
Founded around 1968, girobank was owned by the Post Office. In 1986-7 it had 2.5m customers and made £23m profit. So Thatcher sold it off, because the private sector knew how to do banking. Correction – how to bust banking, and ruin everyone else.
Girobank followed the sad desultory ramblings of the commercial bank business. It became Alliance & Leicester and eventually disappeared altogether into the consolidations that would inevitable come after Big Bang, and nis now lost within Santander.
Thanks
Does the post office currently have some of the remnants of the old system anyway that could be reactivated/repurposed?
I use First Direct bank (which doesn’t have branches). If I want to pay cash in, I do so at the post office.
There must be an easy way to reintroduce a girobank via the post office (save the issue that the post office could be fully privately owned by a czech billionaire in the not too distant future)
I am not convinced a tie uo with the PO is wise now…
Because the management of the Post Office is a splendid example of British business?
On a slightly political note; I don’t see this Labour government as being anything other than a slightly left of centre. But yes, it would be be great to have a publicly owned bank.
The problem I have is that the moment a tory government came to power, they’d sell it off. The banks would loath the existence of a government-owned bank and would make certain it happened. I can’t see a way to stop it happening.
I think it is centre right, at best. Centre-right might be generous.
Somehow, one would need to install an inviolate poison pill/golden share to make it impossible for governments to sell it. Perhaps an entity owning all the voting rights, but earning no dividends. Maybe something in the Mem and Arts requiring all profits to be reinvested? Loathe though I am to suggest it, could the Monarch be such an entity? We might as well make use of the pointless institution!
This is probably way too fanciful to work, of course.
May I make a plea for those of us who have lately met our Waterloo in the complexity of steps and stages we are commanded to take in order to e.g. set up a new direct debt or one-off donation? Recently I forgot I had paid a bill and tried again. Thankfully got a screen intervene showing nothing was owed. Covid has definitely scrambled my cognitive abilities. At 72 they are not going to get better.
Computer literate and formerly confident (!) Honestly – I am not representative of my age group. Many, not just older folks – need very clear and straighforward processes to handle our money safely without triggering any POA set up ( please, not yet!) and maybe have declined the online route as too terrifying. I struggle on but intend searching for a friendlier bank than I am now using. Any kowledge form friends on here welcome.
First I have the arduous task of sourcing a new computer as 11 years old and now unable to update the operating system means I have to shell out – let’s hope for the last time.
I use Nationwide in the main and find it vastly better than than Co-op. The Nationwide app is quite good but I show my age by not quite trusting banking apps, deep down.
I have occasionally had to use Lloyds on line and found it very unfriendly.
At 99 and threequarters I use the Co-op online and have no problems.
The personal app is better than the business app I gave to use
“I show my age by not quite trusting banking apps, deep down”.
I call that common sense. Banks love digital for two reasons only. They can cut their costs as never before. They can very discreetly transfer responsibility for managing the security of deposits from the bank, to the depositor. When cash was king, it was the bank that hat virtually all the responsibility for the security of the customer’s deposits. Not now.
Banks are effectively fully insured by government, for almost nothing. And they have a licence to print money.
And we are supposed to think this is working well, when we are being ripped off; and we are supposed to feel guilty and old to doubting we are not being scammed?
Giro bank was great. It offered banking services to many who the incumbents did not really want.
I think the main point would be to set a benchmark that the existing banks would have to match. The current “competition” is not delivering.
This principle could also apply to energy and telecoms where a State competitor could raise standards without nationalization.
Agreed
The UK still owns 35% of NatWest it could purchase an additional 16% and convert it into a genuine community bank linked to mutuals and post offices.
It shoil;d have done that long ago
But then we are stuck with all the activities the state does not need and its terrible IT
Well the point is to make a community bank the major home mortgage issuer as well as small loan issuer at low lending rates. This will force the other banks to concentrate more on lending to businesses. I use NatWest and the IT has improved but online help still has some way to go.
@Schofield. Help systems are usually bolted on after the software is written. A lot of the time they are automatically generated. You end up with “help” that is technically correct but totally useless.
So you see a field labelled “Transaction ID” and when you click on ‘help’ you are informed that “This is where you type in the Transaction ID”.
And, presumably, it wouldn’t have a CBRA that would have interest paid on it.
If it did the effect would be neutral
Superb Richard
Ellen Brown makes a similar case…and supports a national infrastructure bank
She’s good on this stuff