The People’s Bank Is Deepest Red

Every now and then someone pops up to explain that what this country needs is a People’s Bank. One not run by typical bankers, but by those with the customers’ interests at heart. One of Labour’s policies is the creation, presumably by requiring existing banks to sell properties, of two so-called “challenger banks”.

We now have a pretty clear idea of what a People’s Bank might look like. The official report into the collapse of the Co-Op Bank has been published. It paints a horrifying picture of a bank that was indeed run by people other than bankers, who were supposed to be acting out of altruism and in their customers’ interests.

They seem to have known rather less about banking than I do – and possibly you do, as well. Discussions over whether the bank had enough money to survive appear to have taken second place to those on ethical issues. The former chairman of the bank, the disgraced Paul Flowers, seems to have been popular mainly because he ran meetings well. He knew virtually nothing about the bank and could not even get close to an accurate estimate of its size, as his appearance before Parliament made clear.

The acquisition that sent the bank under, of the Britannia Building Society, was not subject to the sort of checks as to its financial health that would have applied if the purchase had been by a quoted company. The auditors were not given proper access to its books. Had this happened with a quoted bank, it is almost inconceivable that the deal would have gone ahead.

I have no huge time for the banking sector, as other blogs will have made clear. But the rank amateurs at the Co-Op are hardly a good role model for a People’s Bank.

Incidentally, I notice one of Ed Miliband’s first speeches on banking, after he became Labour leader, talked about banks’ responsibility to serve the real economy and to build a long-term, trusted relationship with customers. It was delivered in 2012 – at the London HQ of the Co-Op Bank.

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I Do Not Want What I Have Not Got

Some stories one can simply not make up. That the head of the country’s biggest ethical bank should turn out to be a coke-sniffing crystal meth abuser. And a Methodist minister to boot…

But what has occasioned much extra startlement over the Paul Flowers affair is that he appears to have no qualifications whatsoever to run a bank. I  know much more about banking then he does; both my teenage children would be more suitable to run the Co-op Bank than Flowers. They know as much about banking as he does, and neither, to the best of my knowledge, is a crystal meth abuser.

But with hindsight, this lack of any knowledge or ability to run a bank should not have come as a surprise at all. It is par for the course. There used to be an old joke that went around when the financial crisis kicked in. Name the odd one out: Andy Hornby and Lord Stevenson, the two top men on the board of HBOS, Fred Goodwin of Royal Bank of Scotland and Sir Terry Wogan. The answer, of course, is Wogan. He is the only one with any qualifications to be a banker.

Hornby is the interesting one here. A former management consultant, he first made his name at Asda. This means his job, as with other retailers, can be summarised as persuading people to buy things they do not necessarily need and which they may not be able to afford.

When Hornby pitched up at HBOS, his job seems to have been persuading people to take out loans they did not necessarily need and could not always afford. He can hardly be blamed; it is a seamless career progression, and he probably thought that was what they wanted. When he left HBOS, after it collapsed and took Lloyds with it, he pitched up at the company that owns Boots. Job description: persuading people to buy face creams, etc, etc.

Thereafter, he went to run the bookmaker Coral. Job description: persuading people to take on bets they are, statistically, more likely to lose than win and which they might not be able to afford. There is a pattern here.

When I first had a bank account, I went in mortal terror of my bank manager. He once gave me the choice of surviving over the next three weeks to payday on next to nothing or paying the mortgage. I paid the mortgage. Banking has plainly moved on since then, with the consequences we can all see.

One of the most closely studied economic statistics is the rate of sales on the high street, measured against the rate a year ago. The October numbers are out this week. They show a dip year on year. This is a Bad Thing. Sales, measured on a like-for-like basis, must grow year by year. Economic growth, the economy generally, depends on it.

Yes, I know, so do people’s jobs, businesses, and so on. But you do not have to be a hair shirt-wearing, “let’s all go and live in an unheated yurt and subsist on our own organically grown turnips” puritan to have doubts over an economic model that requires us to buy more and more stuff, on an accelerating basis, that we do not need and may not be able to afford. I am as guilty as any; I do not have a fashion habit, but I do have DVDs I haven’t watched, CDs I don’t have the time to listen to as much as I would like and a pile of books as yet unread. And I keep ordering more books, two this week on Amazon.

And Christmas is approaching. This is the season when we buy other people things they do not necessarily need, etc, etc. And so around and around it goes.