On Sunday, 31st March 2019, Labour’s Shadow Chancellor, John McDonnell MP, announced a radical shake up of the UK banking system to provide the long-term funding needed to prepare our economy for the future, support communities neglected by the finance system and kick start Labour’s Green Industrial Revolution.
Labour’s plans to build a “new public banking ecosystem” so finance works for the many, not just the few, include:
- setting up a Post Bank based in the Post Office network at the heart of our communities;
- setting up a National Investment Bank to support small businesses and overdue infrastructure upgrades;
- keeping the Royal Bank of Scotland (RBS) in public ownership when it returns to profitability, a decade after it was bailed out by taxpayers.
Labour’s Post Bank
Labour’s publicly owned Post Bank run through the post office network will ensure every community has easy access to face-to-face, trusted and affordable banking.
Labour’s Post Bank would have by far the largest branch network of all UK banks. The Party estimates it could create up to 3,600 Post Bank branches, helping to revitalise High Streets by bringing foot fall back into our town centres.
A network of Post Bank branches would help stem the tide of post office closures, uniting important banking, business and community services under one roof and creating skilled jobs within one of the country’s most trusted brands.
Research by Which? has revealed that the UK has lost nearly two-thirds of its bank and building society branches over the past 30 years, from 20,583 in 1988 to just 7,586 today, leaving a fifth of the population two miles away from their nearest branch. Over the past five years the Post Office has announced the closure of around 150 Crown Post Offices, 40% of its 2013 Crown Post Office network.
As well as offering banking services to individuals, the Post Bank will provide relationship banking with small businesses, acting as an “on-lender” for the regional development banks, to kickstart small and medium enterprise (SME) investment.
Halt the sell off of Royal Bank of Scotland and keep it permanently in public ownership:
- The scandal hit bank, which received a £46 billion bail out in 2008 from the public, will stay in public ownership for the long term. Privatisation has already lost the public £3 billion of that investment. The management team will be completely overhauled.
- The bank will be given a new mandate to end the abuses of the past and focus its activities on productive investments.
- An end to the programme of branch closures, which has left just 54 branches in all of England and Wales. A Move Your Money report estimates that “bank branch closures dampen SME lending growth by 63% on average in postcodes that lose a bank branch”. The Federation of Small Businesses has also highlighted the impact of bank branch closures on SMEs, saying: “Bank branch closures damage high street footfall, restrict cash flow in local economies and force business owners to waste time travelling to and from their next nearest branch, which could be miles away.”
Set up a £250 billion National Investment Bank and network of Regional Development Banks to give our businesses, infrastructure and industries of the future the funding they need through:
- An enterprise focus on lending to SMEs, start ups and co-operatives in every region and nation of the UK. The banks will “on-lend” through favoured institutions, including the Post Bank and RBS, to build lasting relationships with the businesses they lend to.
- An infrastructure focus to upgrade our infrastructure in every region and nation. Our creaking infrastructure is the worst for comparable countries.
- An innovation focus to develop world leading industries of the future, including new green manufacturing and businesses in our towns that have had their industries ripped out. This focus will support Labour’s plans for a Green Industrial Revolution and help make sure that the technological advances, automation and the industries of the future benefit the many, not just the few.
John McDonnell MP, Labour’s Shadow Chancellor, said:
“Finance is the central nervous system of the economy. It directs investment, deciding which businesses and projects get off the ground and which fail. For too long, this vital part of our economy has been solely in the hands of the big banks and the speculators. As the financial crisis, scandal after scandal and the chronic lack of investment for our SMEs, manufacturing and in our infrastructure show, this model has failed.
“When the financial crisis struck, the banks were bailed out but the rest of us were sold out. It’s time to secure the investment that we all made and use it to benefit the many not the few.
“Poor access to local bank branches hurts our town centres and local communities, particularly affecting elderly and more vulnerable customers, as well as damaging the ability of local small businesses to invest.
“Labour will build a new, public banking ecosystem to promote vital national priorities and give our SMEs, start ups and co-ops the best chance of success.”