The Move Your Money campaign has emerged this year as a cause célèbre. Launched in February 2012, the campaign calls on people to switch their account, current or savings, away from the too-big-to-fail, shareholder banks that helped to cause the economic crisis, and towards co-operative and mutual banks, such as credit unions and building societies.
Since the campaign’s UK launch, over 500,000 customers have left the too-big-to-fail banks in favour of local, mutual and ethical alternatives.
Widespread public anger with the kleptocratic banking industry – mired in scandals as diverse and pervasive as LIBOR rigging, PPI and CDS mis-selling, not to mention money laundering for Mexican drug cartels, combined with Westminster’s complete lack of appetite to reform ensures the continued relevance of a campaign offering positive alternatives to the too-big-to-fail banks.
For the next phase of the campaign, Move Your Money is calling on activists to lobby local authorities, to move your money from the high street banks whose contracts dominate public finance, to support the growth of mutual and ethical banks, peer to peer lending, and building societies that actively invest in the real economy.
The mutual finance industry in the UK was systematically gutted following the ‘big bang’ financial deregulation of the 1980s, leading to the closure of hundreds of small banks and building societies and the consolidation of the financial market to just four ‘too big to fail’ high street banks.
Figures from the Department for Communities and Local Government for 2011-12 show a combined annual budget of £122bn for English councils alone. Figures from the Co-operative Bank indicate one third of councils currently employ its services, however, initial research by Move Your Money UK indicates many council clients only use the Co-op for a small proportion of their total banking services.
This indicates that tens, if not hundreds, of billions of pounds of public money in local authority budgets still resides with the same big four banks which crashed the economy, and set in train austerity cuts that continue to erode public sector jobs and funding.
As Rolling Stone Magazine Financial Editor Matt Taibbi sets out, the impact of LIBOR rate manipulation on local government is particularly significant. As interest rates were driven down, by Barclays, RBS, HSBC, Lloyds, and other High Street banks, further aided by Bank of England QE, – the amount of interest payable on Council capital savings accounts was decimated – leaving an even bigger hole in public sector finances.
The message from Move Your Money is simple – were UK councils to bank ethically and in the interests of local communities, the results could radically transform the alternative finance sector, stimulating local investment in deprived UK communities.
Following initial contact from Move Your Money, the Greater London Assembly (GLA) recently voted unanimously in favour of endorsing this powerful motion from Jenny Jones to pursue divestment of GLA and Transport for London banking services from Barclays, to a financial provider more in line with GLA’s stated values and ethical procurement policy.
Local government finance could be on the verge of a revolution, with the House of Commons Political and Constitutional Reform Select Committee currently leading a debate on the benefits of codifying the relationship between central and local government. This ‘Magna Carta’ would guarantee councils’ legal and financial independence from Whitehall, establishing a legal status for councils and granting the freedom to raise and spend tax revenue in any legal way open to individuals or companies, subject to public oversight of local government procurement and spending decisions.
A council focused Move Your Money UK campaign would further both of these fundamental aspirations. For greater independence for local government from Westminster, and for greater democratic control and oversight by the public, in local government procurement and spending decisions, ensuring that banks responsible for the financial crisis do not continue to receive a free ride from the taxpayer.
Andy Haldane, the current Bank of England Executive Director for Financial Stability has said: “If as bank customers we want to change the culture of banking, then we should start by supporting those banks who are delivering that change. Putting your money where your mouth is would deliver far greater and more durable change than any amount of banker-bashing.”
Reasons for local government to bank ethically:
▪ Banks crashed the global economy, pushing an estimated 100 million people world-wide back into poverty, requiring massive taxpayer bailouts in the UK, resulting in austerity and local council cuts
▪ Councils are democratic bodies – that should act in the best interests of local residents
▪ Ethical banks don’t pay excessive salaries and bonuses , but reinvest in the real economy
▪ Too-big-to-fail banks engineer, lobby for, and employ aggressive tax avoidance schemes for themselves and their clients – denying the UK crucial tax revenue at a time of protracted austerity and public sector cuts i.e. Barclays paying only 1% tax on a record £11.6bn 2009 profit
▪ Despite Government schemes (‘Merlin’) to encourage lending, high street banks still refuse to lend to SME’s – the lifeblood and job creators of any economy
▪ Too-big-to-fail banks continue to invest in socially useless activities, such as tar sands mining, cluster bombs, fracking, and food speculation
▪ Ethical banks do invest in the real economy, in alternative local businesses and community owned renewable energy projects
▪ High Street banks run illegal rackets such as LIBOR manipulation and aggressive mis-selling of credit default swaps and payment protection insurance, costing clients (including local authorities) millions
Reasons for local government to continue supporting too-big-to-fail
▪ Many UK councils bank with taxpayer owned RBS (NatWest) and Lloyds, – there is an argument councils divesting funds from these banks could impact share prices, harming taxpayer returns at re-sale
▪ The financial services industry provides up to 51% of party political funding – and politicians, like turkeys, don’t vote for Christmas
The reasons for supporting ethical banking largely speak for themselves.
In terms of the reasons against – initial concerns expressed by financial sector pundits in relation to the local government ethical banking campaign focus upon the potential impact to taxpayer owned RBS and Lloyds balance sheets, in the event of re-sale. There is however, another way to view the issue.
Despite an estimated £1.5 trillion spent bailing out the banking sector, taxpayer owned banks still do not invest responsibly, or in the public interest.
As an example, taxpayer owned RBS recently pursued a deal with Kraft to buy out Cadbury, which could have resulted in abandonment of Cadbury’s ethical code, and the offshoring of up to 6000 British jobs to the US and developing nations, in a merger heavily criticized by Berkshire Hathaway investment guru Warren Buffet as a bad deal for both parties.
If profits for taxpayer owned UK banks come at the price of British jobs and tax revenues, we need to be asking ourselves if the existing bank model is something we should be supporting via taxpayer funded bailouts, and local government investment?
Taxpayer owned banks RBS and Lloyds present the Government with a unique opportunity to exert its regulatory oversight, and enforce socially responsible, ethical lending. An opportunity this Government has thus far failed to grasp.
In the USA, the Move Your Money campaign is achieving considerable success in divesting City banking funds to socially responsible lenders. The nation’s two largest cities, Los Angeles and New York City, have passed responsible banking ordinances to collect better data on banks’ community reinvestment activities and to encourage institutions that want to do business within the cities to be more accountable to local concerns.
Other localities are following suit: Seattle city council member Nick Licata has declared that “due to growing disparity in this country’s wealth, we can at the very least review the city’s banking and investment practices to ensure that public funds are invested in responsible financial institutions that support our community”.
In May 2012, the City of Buffalo, New York announced that it would move its entire pot of city funds – some $45m – to the local First Niagra Bank. Buffalo became the seventh New York municipality to divest from JP Morgan Chase in protest against the bank’s foreclosure policies, which directly impact the lives of local homeowners and small businesses.
Some UK local authorities, however, are already re-considering their banking options. Lancashire County Council will invest £100,000 into local businesses using Funding Circle, a ‘peer to peer’ lending marketplace where people directly lend to small businesses, bypassing the banks entirely.
In discussion of his council’s £2.4bn contract with NatWest, Lambeth Councillor Paul McGlone, who sits on the finance scrutiny sub-committee observed, “it’s hard to pinpoint any tangible benefit the council receives, despite the size and value of its contract, with RBS”.
Hackney council has progressively migrated bank account services away from the larger banks, and now banks exclusively with the Co-operative Bank. Principal banking officer Chris Locke explained: “The Co-operative understand the public sector. Other banks — specialists in the private sector – understand that organizations must compete with one another. They don’t really understand that organizations can collaborate, share their research development and save a lot of money by working co-operatively.”
UK banks have been allowed to grow so large that they take their customers for granted, and no longer act in a socially responsible fashion, nor in local communities’ interest. With financial donations to political parties from the banks at record levels, there is little appetite for the necessary root and branch reforms within Westminster.
Douglas Flint – Chairman of HSBC, humbled by an ever-growing list of recent scandals took the unprecedented step of admitting self-regulation of the banks had failed, and that UK banks had ‘lost the right to self-rule’.
Despite the fall from grace of the High Street banks, predatory pay-day lenders are also getting in on the political lobbying game. The recent departure of David Cameron’s senior advisor Jonathan Luff to work for pay-day lender Wonga – highlights the ‘revolving door’ between Government and financial sector corporations, and the lack of political will to tackle the legal ‘loan shark’ industry.
Nobody personifies the toxic nature of the revolving door better than Angela Knight. Knight is a former Conservative Party MP, Economic Secretary to the Treasury, and former CEO and firewall of the British Bankers Association (BBA), who presided over the illegal manipulation of the $300 Trillion LIBOR global interest rate benchmark.
Knight resigned from the BBA earlier this year, departing amidst the furor of the Barclays LIBOR scandal, accepting a role with an energy sector lobby group Energy UK, beginning in September.
Knight coincidentally, is now defending further illegal market rigging in the UK gas sector, where winter fuel poverty results in the preventable deaths of 65 UK citizens every day. Knight has recently been appointed to the board of TFL by Mayor Boris Johnson, – often criticized for his unconditional support of Barclays and the London financial sector.
Knight’s replacement at the BBA, Anthony Browne, is a former advisor to Boris Johnson, and is the Head of Morgan Stanley ‘Government Relations’ – EMEA region. Brown is also a former economics correspondent for the BBC, and was previously Director of center–right policy think tank Policy Exchange – once being described as ‘bordering on fascism.’
Clearly, political lobbying and financial sector influence on Government policy is out of control, and urgent action must be taken to address the crisis of democracy.
It is here local government can take the initiative, bypassing the revolving door within Westminster (which enables wealth extraction by banks and corporations), by encouraging a return to ethical local investment by socially responsible financial institutions, which have a stake in the local community and actively invest in its future.
Councils can take the lead, stimulating investment in peer to peer lending, local credit unions, co-operative and ethical banks, growing the alternative financial sector and improving access to low cost credit for the financially excluded – reducing demand for predatory pay day lenders such as Wonga.
The Tax Justice Network (Richard Murphy), with assistance from Ethical Consumer have been busy researching successful EU local government policies designed to exclude Corporations operating within secrecy jurisdictions and tax havens, from bidding on council contracts. It is hoped such provisions will be widely adopted by UK local government in an attempt to close the ‘tax gap’ estimated at £120 billion per year – which deprives communities of significant tax revenues and investment spending, at a time of protracted austerity.
This winter, Move Your Money will be conducting research with the aim of creating an ethical finance toolkit for local authorities. We hope this will encourage and guide councils seeking to move public funds into ethical, local and mutual alternatives.
We want to hear from activists who have an interest in lobbying their local council to move your money from too-big-to-fail, to mutual and ethical banks. We see this action as a catalyst to ensure ongoing investment in deprived UK communities, whilst sending a powerful message that as citizens – we will not sit idle and watch our tax revenues feather the nests of fat-cat City bankers.
Move Your Money UK would like to hear from councils and staff interested in taking part in consultation, and acting as ‘demonstrator councils’ in moving taxpayer money to mutual and ethical banking providers. Please contact firstname.lastname@example.org for further details.