Mark Serwotka, PCS General Secretary, argues that banks should be publicly owned
To know where we should go on bank reform, we have to understand where we have been. The banking crisis that swept the globe in 2008 was not a crisis of the banks alone, but a crisis of government: the failure of successive governments in the UK and globally to have any oversight of the banks. It was negligent.
Many of us as parents know what would happen if we were negligent: if you let a toddler dictate what they wanted to eat, the diet of jelly, ice cream and cakes would probably leave them obese or in a diabetic coma, while the sugar-induced highs and crashes would bring trauma to the household. Never mind the nanny state, the government has been a bad parent to the toddling banks. It has allowed them unsupervised access to the biscuit barrel. The banks are now even more like toddlers, unable to stand without government support.
We should be clear: the banks are indeed too important to fail. Millions of working people depend on banking for their savings, their pensions, their mortgages and for the daily management of their finances. The assets traded and gambled around the globe are people’s life savings, their security in retirement and their family homes. The current situation is even more precarious than in 2008. Several banks and governments teeter on the brink of collapse. A Greek default could result in a domino effect. While the UK was in a financially secure enough position to offer bail-outs in 2008, it is doubtful if today that would be politically acceptable or economically affordable.
Any rational observer would concede that anything vital to our society demands close oversight. The shocking thing about the banking collapse in 2008 was how the regulators were unaware of, and did not understand, many of the intricate schemes and processes operated in the banking system. It is time the public interest became a factor in our banking system. Given the importance of banking – not as an end in itself but because of what it facilitates – and because of its vulnerability, it is essential that the rebuilding of the system is done in the public interest.
My trades union has a clear policy: the banks should be publicly owned. Some might say this is ideological. I would say it is logical. Banks are so vital that they have to be underwritten by the public – just like public transport and utilities such as gas, electricity and water. If British Gas or Thames Water went bust, the government could no more shrug its shoulders and say “that’s the market” than it could when the UK banking system teetered on the brink in 2008-09. But there are several other reasons why the banks should be publicly owned.
First, a bank underpinned by the state could lend at lower rates and offer savers higher rates. When Northern Rock was nationalised, Sir Richard Lambert, then CBI director general, told the Treasury Committee: “It is critically important that state ownership of the bank should not be allowed to distort the savings market, through access to government funds on favourable terms”. In other words, offering the public (and businesses) a better deal would “distort the market”. Just as private finance initiatives have proved incredibly wasteful, the inherent stability of the state makes it the natural home for secure banking.
Second, we are suffering from a crisis of investment. Banks are cautious about lending yet there is no end of investment opportunities from much-needed housing to redressing the UK’s woeful underinvestment in renewable energy infrastructure. Investment is essential to creating jobs, cutting the welfare bill and increasing our tax revenues – closing the deficit. At the moment we have the worst of all worlds: a government irresponsibly cutting capital spending and private banks that are unwilling to lend. Too much of the money banks have gained through quantitative easing has been speculated with or invested overseas.
Third, we should act in the public interest. While my union members are demonised in the rightwing tabloids as feather-bedded pen pushers with gold-plated pensions (the average member is on £22,850 and will get an £80 per week pension), the fat cats are rewarded with obscene bonuses and huge salaries. We could direct investment to where it is socially useful, ensure savings are encouraged and get a better grip on the housing market and mortgage finance.
The question is one of democracy: it is the wages, pensions and mortgages of millions that create the wealth banks have squandered. It is time those millions controlled their billions.
- This article first appeared in the November 2011 issue of Financial World