Rocking the system

A campaign is mounting over Northern Rock, the bank whose collapse heralded the financial crisis. Hilary Wainwright reports on the effort to create a community-owned bank serving wider social needs, not private profits

February 23, 2010
4 min read


Hilary WainwrightHilary Wainwright is a member of Red Pepper's editorial collective and a fellow of the Transnational Institute. @hilarypepper

It’s difficult nowadays to imagine that people ever felt affection for a bank. But listen to staff of Northern Rock and residents of the north east and you hear a story of a bank that was seen as a responsive and, in retrospect, even a loved public service.

It’s odd, therefore, to hear the one recent reference to mutuals by a government minister (Tessa Jowell in December) being applied not to overcoming the disasters of finance plcs but to the questionable benefits of breaking up the public sector. This included the laughable suggestion that a mutualised public sector could draw on ‘the efficiency of the private sector’.

Northern Rock’s collapse was the first visible sign of the wider financial crisis, which was the result of precisely the forces of profit maximisation that the mutuality model was designed to challenge. These were typified by the company’s post de-mutualisation CEO, Adam Applegarth, and his £700,000 pay off. Now the profitable parts of the company are set to be sold off to the private sector again. A tragic case of socialising debt and privatising profit.

Northern Rock, saved by a government loan of £26 billion, has been split in two. On the one hand there is now Northern Rock plc, a potentially very profitable high street bank. Insiders reckon that annual profits could be over £250 million within its first year. On the other hand is an organisation that is responsible for the risky mortgages, repayment of the government debt and for the existing staff pension fund and pension shortfall of £60 million. It will remain the responsibility of the government.

But all is not lost. The force of a strong pro-mutual regional tradition is joining with the strength of economic arguments that start from the public good. A growing campaign is underway for the remutualisation of Northern Rock. It began with a report by the Centre for Mutual and Employee-owned Business at Oxford University, which argues, for example, that mutual ownership can counter-balance the short-termist pressures of the City. It also argues that mutuals help to reduce the present concentration of financial sector resources and employment, dispersing wealth and welfare to local economies.

These arguments and more have been taken up by Alliance For Finance, an increasingly active confederation of 15 trade unions and staff associations in UK financial services (with a total of 200,000 members in all). Russell Greig, its secretary, is based in Chester-le-Street, the heart of Northern Rock country.

He feels that the company would no longer exist if it hadn’t been for government aid. So ‘it makes sense that this support should be returned to the community. It can’t be right that the financial support pumped into Northern Rock should simply be used to allow another plc to profit. The new company could be turned into a community-owned organisation serving the needs of the communities and able to re-invest into them.’

When Greig talks of reinvestment in the communities, he means investing the profits into giving loans to more people and on better terms. He also means giving more resources to the Northern Rock Foundation, which, before the crisis, was a major funder of community projects in the North. ‘Instead of pressure from shareholders in pursuit of profits and dividends, the pressure will be from the community for a socially responsible lender, serving the needs of its customers (owners) and wider community,’ he says.

There’s a long term interest for the government here: as the mutual company becomes profitable it would steadily repay the government’s loan. But there’s also a case for the government returning a proportion of this value to the company as a government investment. ‘The government could then use the mutual to provide socially useful banking to overcome financial and economic exclusion,’ argues Russell Greig. ‘It could also use it as a basis to regenerate deprived areas again through the communities where it operates and would effectively serve.’

Some 100 MPs have signed an early day motion calling for Northern Rock’s remutualisation. Does Labour have the courage to apply its rhetoric about mutualisation to the financial sector and build on the century-old success stories of co-operative and mutual organisations?

Links:

Alliance for Finance

Compass is currently working on issues of remutualisation, looking at the case of Northern Rock – contact Compass for more details.

Centre For Mutual and Employee-owned Business


Hilary WainwrightHilary Wainwright is a member of Red Pepper's editorial collective and a fellow of the Transnational Institute. @hilarypepper


✹ Try our new pay-as-you-feel subscription — you choose how much to pay.

Red Pepper’s race section: open editorial meeting 24 May
On May 24th, we’ll be holding the third of Red Pepper’s Race Section Open Editorial Meetings.

Our activism will be intersectional, or it will be bullshit…
Reflecting on a year in the environmental and anti-racist movements, Plane Stupid activist, Ali Tamlit, calls for a renewed focus on the dangers of power and privilege and the means to overcome them.

West Yorkshire calls for devolution of politics
When communities feel that power is exercised by a remote elite, anger and alienation will grow. But genuine regional democracy offers a positive alternative, argue the Same Skies Collective

How to resist the exploitation of digital gig workers
For the first time in history, we have a mass migration of labour without an actual migration of workers. Mark Graham and Alex Wood explore the consequences

The Digital Liberties cross-party campaign
Access to the internet should be considered as vital as access to power and water writes Sophia Drakopoulou

#AndABlackWomanAtThat – part III: a discussion of power and privilege
In the final article of a three-part series, Sheri Carr gives a few pointers on how to be a good ally

Event: Take Back Control Croydon
Ken Loach, Dawn Foster & Soweto Kinch to speak in Croydon at the first event of a UK-wide series organised by The World Transformed and local activists

Red Pepper’s race section: open editorial meeting 19 April
On April 19th, we’ll be holding the second of Red Pepper’s Race Section Open Editorial Meetings.

Changing our attitude to Climate Change
Paul Allen of the Centre for Alternative Technology spells out what we need to do to break through the inaction over climate change

Introducing Trump’s Inner Circle
Donald Trump’s key allies are as alarming as the man himself

#AndABlackWomanAtThat – part II: a discussion of power and privilege
In the second article of a three-part series, Sheri Carr reflects on the silencing of black women and the flaws in safe spaces

Joint statement on George Osborne’s appointment to the Evening Standard
'We have come together to denounce this brazen conflict of interest and to champion the growing need for independent, truthful and representative media'

Confronting Brexit
Paul O’Connell and Michael Calderbank consider the conditions that led to the Brexit vote, and how the left in Britain should respond

On the right side of history: an interview with Mijente
Marienna Pope-Weidemann speaks to Reyna Wences, co-founder of Mijente, a radical Latinx and Chincanx organising network

Disrupting the City of London Corporation elections
The City of London Corporation is one of the most secretive and least understood institutions in the world, writes Luke Walter

#AndABlackWomanAtThat: a discussion of power and privilege
In the first article of a three-part series, Sheri Carr reflects on the oppression of her early life and how we must fight it, even in our own movement

Corbyn understands the needs of our communities
Ian Hodson reflects on the Copeland by-election and explains why Corbyn has the full support of The Bakers Food and Allied Workers Union

Red Pepper’s race section: open editorial meeting 15 March
On 15 March, we’ll be holding the first of Red Pepper’s Race Section open editorial meetings.

Social Workers Without Borders
Jenny Nelson speaks to Lauren Wroe about a group combining activism and social work with refugees

Growing up married
Laura Nicholson interviews Dr Eylem Atakav about her new film, Growing Up Married, which tells the stories of Turkey’s child brides

The Migrant Connections Festival: solidarity needs meaningful relationships
On March 4 & 5 Bethnal Green will host a migrant-led festival fostering community and solidarity for people of all backgrounds, writes Sohail Jannesari

Reclaiming Holloway Homes
The government is closing old, inner-city jails. Rebecca Roberts looks at what happens next

Intensification of state violence in the Kurdish provinces of Turkey
Oppression increases in the run up to Turkey’s constitutional referendum, writes Mehmet Ugur from Academics for Peace

Pass the domestic violence bill
Emma Snaith reports on the significance of the new anti-domestic violence bill

Report from the second Citizen’s Assembly of Podemos
Sol Trumbo Vila says the mandate from the Podemos Assembly is to go forwards in unity and with humility

Protect our public lands
Last summer Indigenous people travelled thousands of miles around the USA to tell their stories and build a movement. Julie Maldonado reports

From the frontlines
Red Pepper’s new race editor, Ashish Ghadiali, introduces a new space for black and minority progressive voices

How can we make the left sexy?
Jenny Nelson reports on a session at The World Transformed

In pictures: designing for change
Sana Iqbal, the designer behind the identity of The World Transformed festival and the accompanying cover of Red Pepper, talks about the importance of good design

Angry about the #MuslimBan? Here are 5 things to do
As well as protesting against Trump we have a lot of work to get on with here in the UK. Here's a list started by Platform


2