Get Red Pepper's email newsletter. Enter your email address to receive our latest articles, updates and news.
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?
Compass is currently working on issues of remutualisation, looking at the case of Northern Rock – contact Compass for more details.
Corbyn just won a prize for peace activism - so why is the Labour Party still committed to renewing trident? Lily Sheehan investigates.
Connor Devine writes that whilst Brexit might be a car crash, we can't just side with an institution responsible for enforcing austerity.
Michael Coates reviews a new film revealing the shocking state of housing inequality in the UK.
The vicious media campaign against trans people is part bigotry, part strategy, writes Roz Kaveney
Jon Trickett MP reports on 'Dickensian' levels of poverty and hardship felt across the UK.
Natasha King busts some myths around the No Borders debate
He was once a radical icon, but now he's a mouthpiece for racism and nationalism. Time to get off stage, writes Michael Calderbank
Consensus seems to have shifted, but austerity is far from over. The chancellor has committed us to yet more years of misery while the rich get richer, writes Richard Seymour.
Frustrated at the idea of another royal wedding? You're not alone. Joana Ramiro argues we should stop idealising a fundamentally undemocratic institution.
Liberal elites are using Russian interference to minimise their own political failures, writes Matt Turner
Meet the frontline activists facing down the global mining industry
Activists are defending land, life and water from the global mining industry. Tatiana Garavito, Sebastian Ordoñez and Hannibal Rhoades investigate.
Transition or succession? Zimbabwe’s future looks uncertain
The fall of Mugabe doesn't necessarily spell freedom for the people of Zimbabwe, writes Farai Maguwu
Don’t let Corbyn’s opponents sneak onto the Labour NEC
Labour’s powerful governing body is being targeted by forces that still want to strangle Jeremy Corbyn’s leadership, writes Alex Nunns
Labour Party laws are being used to quash dissent
Richard Kuper writes that Labour's authorities are more concerned with suppressing pro-Palestine activism than with actually tackling antisemitism
Catalan independence is not just ‘nationalism’ – it’s a rebellion against nationalism
Ignasi Bernat and David Whyte argue that Catalonia's independence movement is driven by solidarity – and resistance to far-right Spanish nationalists
Tabloids do not represent the working class
The tabloid press claims to be an authentic voice of the working class - but it's run by and for the elites, writes Matt Thompson
As London City Airport turns 30, let’s imagine a world without it
London City Airport has faced resistance for its entire lifetime, writes Ali Tamlit – and some day soon we will win
The first world war sowed the seeds of the Russian revolution
An excerpt from 'October', China Mieville's book revisiting the story of the Russian Revolution
Academies run ‘on the basis of fear’
Wakefield City Academies Trust (WCAT) was described in a damning report as an organisation run 'on the basis of fear'. Jon Trickett MP examines an education system in crisis.
‘There is no turning back to a time when there wasn’t migration to Britain’
David Renton reviews the Migration Museum's latest exhibition
#MeToo is necessary – but I’m sick of having to prove my humanity
Women are expected to reveal personal trauma to be taken seriously, writes Eleanor Penny