Want to see a sustainable future for British banking? The Feeling’s Mutual

By Michael Stephenson

The image of hundreds of people queuing to withdraw their money from Northern Rock is still one of the most dramatic to have emerged from the financial crisis. The Rock symbolises and embodies for many the failures of the old system, of regulation, of unrestricted greed – and the failures of the last Tory government.

We cannot allow the Rock to return to its failed past – not only would this imply that the Government has learnt nothing from the bank’s near collapse, but it would send the signal that a return to the status quo is inevitable.

If we’re looking for the solution to Northern Rock’s future, we may be better off taking heed of its past, before the days of sub-prime madness and unrestrained greed.

The Rock was once a building society, but demutualised with the help of Tory legislation. The Conservatives thought the best way to encourage the growth of customer-owned building societies would be to allow them to be taken over by shareholders. In the case of Northern Rock and others, this policy proved disastrous. Shareholders demanded rapid expansion and this led management to diversify company interests into riskier markets, most notably, low-value mortgages propped up by the seemingly inextricable march of the housing price boom. The rest, as they say, is history. Out of the ten building societies that demutualised, not a single one remains as a stand-alone bank. Six are part of entities in receipt of government support.

As for Northern Rock, in less than 15 years, a respectable, community-focused building society had become a national liability and a stress on the public finances.

In our campaign, The Feeling’s Mutual, the Co-operative Party is calling for the remutualisation of Northern Rock.

Remutualisation means putting the bank back into the hands of its customers. It means putting people before profit; responsibility before greed. The mutual model of ownership, which stands as an alternative to shareholder ownership, has proved resilient through the recession.

There is one fundamental difference between co-operative and mutual financial organisations and their PLC competitors; that they exist to provide a service for their members rather than create wealth for external shareholders.

The fact that these organisations operate using democratic voting systems, on a one-member-one-vote basis, allows them to take a long-term view of their members’ interests. As we collectively count the costs of the short-term thinking of our financial institutions, this approach to business should unquestionably be the future direction that we are looking for.

Our campaign to remutualise the failed banks has already attracted widespread support. Just in the last week we have had great support from Progress, who have promoted the campaign, and Jon Cruddas MP endorsed our campaign in the Compass Summer Lecture. We have campaigned on high streets with our specially branded “chequebooks”. We’d like you to join us.

More than anything, remutualising Northern Rock would show the public that we are serious about responsible banking. It would close the circle that started with Tory demutualisation, through sub-prime mortgages and near collapse.

A message must be sent to the electorate that people come before profit, that corporate decadence can be held in check. We are proposing one way in which it could.