Could new community banks change Britain for the better?

A protest against the ECB in 2015. Image: Getty.

In the wake of the 2008 crisis, it rapidly became clear that banking was broken. The global financial sector had captured its own regulators and mis-sold mortgages while spreading the risk across the entire system to such an extent that the global economy crashed nearly overnight.

Andy Haldane, chief economist of the bank of England responded by suggesting that part of the problem was lack of diversity of ownership model. This dovetailed neatly with the work the Royal Society of Arts (RSA) was doing, envisaging the new economy that was clearly necessary to replace the broken old one: modelling, researching and promoting initiatives and policies such as economic democracy, basic income, financial reform etc. Now, over 10 years later several economists affiliated with the RSA are launching or promoting public and community banks.

Community and social banks of this sort are commonplace in several other countries: there are the Sparkassen in Germany, the ICBA group in the US and Triodos in the Netherlands. The Sparkassen banks have very good customer relations relative to the rest of the German financial sector, while an ICBA member bank, the Bank of North Dakota, helped the state weather the effects of the financial crash in a way that just did not happen in other states. Meanwhile the Netherlands’ Triodos only finances projects that aim to make a positive cultural, social or environmental change – particularly financing a transition to renewable energy.  

Tony Greenham, former director of economics at the RSA, is one of the economists promoting community banks as a solution for the UK, and is currently launching South West Mutual, a community bank for the South West region. Greenham describes it as a regional stakeholder bank that is “focussed on a particular geographic subregion of a country, with a dual social and financial mission”. It differs from a normal shareholder bank insofar as it’s accountable to all stakeholders, not just shareholders. In practice this means that anyone with a stake in the bank, which could simply be a current account, gets to vote on how it is run.

Greenham explains that “these banks are quite often successful by collaborating together in networks to share costs and resources”. That is exactly what is happening in the UK. The Community Savings Bank Association is a network of eighteen banks, of which South West mutual is one, which are aiming to establish themselves across the UK, from Scotland to Kent.

Such banks could help the UK address the structures behind a variety of social and economic problems. The city of London and the hegemony of the banks and financial institutions based there, bear significant responsibility for the political and economic malaise we find ourselves in today. Capital flows from the various regions of the UK into London, and the presence of the financial sector there narrows the focus of politicians to a small area in and around London, meaning it receives a disproportionate amount of public spending at the expense of poorer areas.

New community banks might not be able to break the stranglehold of the city over our politics and economics, but they can mount a challenge and show there is another way. They outperform the big banks on a number of metrics such as financial inclusion, lending to small and medium businesses and smoothing out regional inequalities.


That last metric is crucial to the UK which has some of the worst regional inequalities in western Europe. Greenham and others in the new economics scene argue that part of the reason that these inequalities are so bad is because we lack these regional stakeholder-owned banks that can capture and recirculate money within a region and prevent it from flooding back into the capital.

Greenham is not the only one who thinks this. He has been in touch over a period of months with Matthew Brown, leader of Preston Council and pioneer of the much lauded “Preston model”, who is helping to launch the North West regional community bank which is part of the CSBA network. Their regional and community focus, and the ability to retain capital inside an area, means these banks will be a boon to further devolution and projects, like the Preston model, based on radical municipalism.

Some critics – such as RSA fellow, economist and social bank advocate Paul Gower who will be speaking at the Institute for Social Banking’s summer school in Switzerland – have suggested that the smaller scale of these banks can lead to corruption, as has sometimes happened in Germany, if they are not carefully managed. Greenham’s argument is that “all corporate failures are ultimately failures of governance”: he disagrees that the smaller scale makes these banks inherently more vulnerable to corruption. Indeed, he notes, nobody points to the corruption at Metrobank as indicative of inherent flaws at that larger scale of finance.

Supporters of community banks also argue that they could have an impact beyond their size by dragging the larger banks in a more socially oriented direction. Greenham likens it to the role the BBC as a public service broadcaster has played in raising the quality of other channels’ programming, by forcing them to compete with programme designed a social good.

Meanwhile, Gower notes that the big banks are stealing the language of social banks and may find themselves in a situation where their employees have bought into the social purpose: shareholders and directors would have no choice but to comply or risk damaging employee engagement and therefore productivity.

The CSBA network probably isn’t the revolution people in Occupy camps were hoping for 10 years ago. But whether it’s helping finance the retrofitting of houses with passive insulation as part of the zero carbon transition, regenerating regions or rebuilding the high street, these smaller, democratically controlled and socially oriented banks can help address the abject failures of big financial institutions and could form a small part of much wider transformations in the country.                    

 

 
 
 
 

There isn’t a war on the motorist. We should start one

These bloody people. Image: Getty.

When should you use the horn on a car? It’s not, and anyone who has been on a road in the UK in living memory will be surprised to hear this, when you are inconvenienced by traffic flow. Nor is it when you are annoyed that you have been very slightly inconvenienced by another driver refusing to break the law in a manner that is objectively dangerous, but which you perceive to be to your advantage.

According to the Highway Code:

“A horn should only be used when warning someone of any danger due to another vehicle or any other kind of danger.”

Let’s be frank: neither you nor I nor anyone we have ever met has ever heard a horn used in such a manner. Even those of us who live in or near places where horns perpetually ring out due to the entitled sociopathy of most drivers. Especially those of us who live in or near such places.

Several roads I frequently find myself pushing a pram up and down in north London are two way traffic, but allow parking on both sides. This being London that means that, in practice, they’re single track road which cars can enter from both ends.

And this being London that means, in practice, that on multiple occasions every day, men – it is literally always men – glower at each other from behind the steering wheels of needlessly big cars, banging their horns in fury that circumstances have, usually through the fault of neither of them, meant they are facing each other on a de facto single track road and now one of them is going to have to reverse for a metre or so.

This, of course, is an unacceptable surrender as far as the drivers’ ego is concerned, and a stalemate seemingly as protracted as the cold war and certainly nosier usually emerges. Occasionally someone will climb out of their beloved vehicle and shout and their opponent in person, which at least has the advantages of being quieter.

I mentioned all this to a friend recently, who suggested that maybe use of car horns should be formally restricted in certain circumstances.

Ha ha ha. Hah.

The Highway Code goes on to say -

“It is illegal to use a horn on a moving vehicle on a restricted road, a road that has street lights and a 30 mph limit, between the times of 11:30 p.m. and 07:00 a.m.”

Is there any UK legal provision more absolutely and comprehensively ignored by those to whom it applies? It might as well not be there. And you can bet that every single person who flouts it considers themselves law abiding. Rather than the perpetual criminal that they in point of fact are.


In the 25 years since I learned to drive I have used a car horn exactly no times, despite having lived in London for more than 20 of them. This is because I have never had occasion to use it appropriately. Neither has anyone else, of course, they’ve just used it inappropriately. Repeatedly.

So here’s my proposal for massively improving all UK  suburban and urban environments at a stroke: ban horns in all new cars and introduce massive, punitive, crippling, life-destroying fines for people caught using them on their old one.

There has never been a war on motorists, despite the persecution fantasies of the kind of middle aged man who thinks owning a book by Jeremy Clarkson is a substitute for a personality. There should be. Let’s start one. Now.

Phase 2 will be mandatory life sentences for people who don’t understand that a green traffic light doesn’t automatically mean you have right of way just because you’re in a car.

Do write in with your suggestions for Phase 3.