Viewpoint: Joel Benjamin of Move Your Money UK explains why they are launching a local authority ethical banking campaign
Move Your Money UK launched in February 2012 in order to help transform widespread public anger with the big banks into active support for ethical and mutual banking sector in the UK. The sector was systematically gutted, following financial deregulation of the 1980’s (the ‘big bang’), resulting in the closure of hundreds of small banks and building societies, leading to the consolidation of the financial market within just four too-big-to-fail high street banks.
Within the first six months of this year, the Move Your Money UK has seen more than half a million customers close accounts with high street banks, moving their money to mutuals, ethical banks, and credit unions.
The next stage for the Move Your Money UK is encouraging and assisting institutions move their money out of the four largest high street banks. A large part of this work will focus on the role of local authorities.
Local authority financial arrangements in the UK could be on the verge of witnessing something of a revolution, with the House of Commons Political and Constitutional Reform Select Committee leading debate on the benefits of codifying the relationship between central and local government.
Often referred to as ‘local governments – magna carta,’ codification would guarantee councils’ legal and financial independence from Westminster, establishing an irrevocable legal status for councils and the freedom to raise and spend revenue in any legal way open to individuals or companies, subject to local people’s consent.
A council focused Move Your Money UK campaign would further both of these fundamental aspirations – for greater independence for local government from the centre, and for greater democratic control and oversight by the public, in local government procurement and spending decisions.
DCLG 2011-12 figures show a combined annual budget of £122 billion for English councils. Despite the claim from the Co-operative Bank that one third of councils currently employ its services, initial research by Move Your Money UK illustrates 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 big four banks.
In the USA, the Move Your Money project (which rose to prominence with the Occupy Wall Street movement) has seen in excess of 10 million customers close accounts with the ‘too-big-to-fails’, and is achieving considerable success in divesting City banking funds to socially responsible lenders as well.
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 with the cities to be more accountable to local concerns.
Other localities are following suit – Seattle Council member Nick Licata said “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, NY announced that it would move the entirety of city funds, some $45 million dollars, to the local First Niagra Bank. Buffalo became the 7th New York municipality to divest from JP Morgan Chase, in protest against the bank’s foreclosure policies, which directly impact the lives of local home-owners and small businesses.
Movement in the USA market to look to extract local benefits from City financial arrangements stands in stark contrast to the UK, where the market dominance of the big four banks reinforces the much criticized culture of complacency and entitlement – meaning negotiating contracts and extracting local benefit is nigh on impossible.
Some local authorities however, are already re-considering their banking options. In discussion of his council’s £2.4bn contract with NatWest, Lambeth Councillor Paul McGlone, who sits on the Finance Scrutiny Sub Committee – has 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 bank exclusively with the Cooperative Bank. Principal Banking Officer Chris Locke said:
“The high street bank had a typical monopoly position – take it or leave it, and I mentioned this to the Coop, and said I was really unhappy with the services that were being provided. The Cooperative understand the public sector, other banks – specialists in the private sector, they 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 cooperatively”.
It has become increasingly clear that regulation of the UK financial sector is no longer fit for purpose. A list of 2012 banking scandals which includes PPI miss-selling to SME’s; LIBOR manipulation by Barclays and RBS; HSBC money-laundering for drug cartels and shadowy foreign regimes; and Standard Chartered’s US sanction busting dealings in Iran – all attest to this fact.
With many of these controversies, the ultimate losers are the UK tax-payers, mum and dad investors, and small business owners – the life blood of any community. Not to mention local authorities, already struggling under austerity – with budgets slashed by up to 28% since the 2008 financial crisis.
UK banks have been allowed to grow to such a size that they have taken 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’ financial sector reforms within the halls of Westminster.
Through a local authorities campaign, Move Your Money UK is seeking to reverse this trend, to encourage a return to ethical, local investment by fit for purpose, socially responsible financial institutions, which have a stake in the local community and actively invest in its future.
It is here that local authorities can take the lead, by stimulating investment in 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 lending facilities.
Move Your Money UK is set to conduct research in autumn 2012, with the aim of creating an ethical finance toolkit for local authorities, to guide councils seeking to move funds into ethical, local and mutual banks.
Move Your Money UK is planning a series ethical finance seminars for local authorities, over the coming months. Local authorities interested in the campaign are encouraged to contact firstname.lastname@example.org for further information on the campaign, and how to get involved or to offer support.
Move Your Money UK is an independent, not-for-profit campaign, run by young people from a range of professional sectors, who volunteer their time. For more details, please see their website at www.moveyourmoney.org.uk.