Gareth Thomas, chair of the Co-operative Party, has outlined proposals to reform the banking sector, which includes making RBS into a mutual.
Discussing the Party’s efforts to bring about banking reform, Mr Thomas looked back at RBS’s role in the 2008 financial crisis at the Co-operative Party conference in London. The chief executive at the time, Fred Goodwin, had helped secure a £49bn takeover of Dutch bank ABN Amro in 2007. But when the financial crash hit six months later, the bank needed a £45bn taxpayers’ bailout to stay alive, and the government took an 81% shareholding.
“The Fred Goodwins might have gone,” said Mr Thomas, “but the basic structure of the banking market hasn’t changed, and even the government’s favourite watchdog is worried that customers – you and I, small businesses, local charities – still aren’t getting a good deal.
“It’s time the government recognised the need for a more diverse set of financial lenders: a big new mutual. How about instead of RBS, we have the Royal Building Society of Scotland, alongside Nationwide and the smaller societies – genuinely able to challenge the big banks?”
RBS failed the Bank of England’s stress test last year. Last month, the European Commission accepted the joint Treasury and RBS proposal that will see RBS pay some of their business customers to switch accounts to rivals. The bank will also put money into a fund to support challenger banks.
Mr Thomas welcomes the move but thinks it does no go far enough in creating genuine competition in financial services. He believes that key to a competitive banking market is having different types of financial institution – not just traditional banks, but also building societies and mutual banks. These models would have an ownership structure that meant they still had to be profitable but were not focused on short-term returns, he argued in a blog post for LabourList.
At the conference, Mr Thomas also made the case for services in banking, energy, and social care to be run by people in their collective interest instead of just for profit.
“I believe in public ownership – not the old-style Gas and Electricity Boards of yesteryear, but the public holding power, being able to shape directly the communities they live in, the services they depend on, and the places where they work,” he said.
“I have always believed in the power of ordinary people to come together to challenge vested interests, to co-operate, to build a different, more equal future together. Not nationalisation of the commanding heights but genuine public ownership, by the many, for the many.”
Mr Thomas also called for a one-off windfall tax on energy firms who have made excess profits of up to £1.4bn a year, which could be used to significantly expand locally owned community and co-operative renewable energy schemes, as well as some municipal energy firms.
“We need a transformation of the energy market to stop excess profits, rocketing prices and soaring executive pay,” he said. “A one-off windfall tax to drive the expansion of locally owned renewable energy companies would put power in the hands of customers, create jobs and increase competition as well as being good for the climate and our international commitments.
“As well as measures to help energy customers now, a long-term plan to change the way energy is produced and sold in our country, mirroring the success of German and US energy co-operatives is long overdue and a windfall tax is pivotal.”
A windfall tax could raise up to £5bn, claimed Mr Thomas – the equivalent of £1bn for each year of excess profits identified by the Competition and Markets Authority. Research by Citizens Advice suggests that the Big 6 suppliers have made £7.5bn in “unjustified profits” over the last eight years. A report by the Competition and Markets Authority also concluded that between 2009 and 2014 customers had paid £1.4bn a year more than they would have in a fully competitive market.
“Our challenge is still to get power into the hands of ordinary people and keep it there. One hundred years on we’re in a good place, but we can do more. We should do more. Together we will do more,” added Mr Thomas.
