Good news for Co-operators

Via Politics for people comes an article indicating that the Chancellor is in favour of encouraging mutualisation:

Alistair Darling will next month signal strong support for mutual savings banks and building societies when he sets out a white paper on strengthening Britain’s financial system.

The chancellor has spoken warmly about the mutual model, embodied in institutions such as Nationwide, which tend to run a less risky business model, based on savings and lending. The Treasury is assessing potential legal or regulatory changes to help mutuals ahead of the white paper.

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Although Mr Darling accepts that some mutuals can be run just as badly as banks such as Northern Rock, he believes they are less likely to use “extreme” funding models or to depend so heavily on wholesale money markets. Building societies have only 20 per cent of the mortgage market, down from 59 per cent before the wave of demutualisations sparked by the Building Societies Act of 1986.

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a spokeswoman for the Building Societies Association said that the time was ripe for an expansion of the sector, given that its model tended to lead to cheaper borrowing rates. “Customers are fed up with the plc banking model, this is a good time for alternative models.”

This is excellent news, mutual lending groups are more ethical and more democratic than businesses working on other lending models. They are also less reckless when it comes to borrowing and lending. A characteristic that leaves them less vulnerable to the kind of market down turn that pushed the Northern Rock to the wall.

As anyone who has spent five minutes talking to the Club Secretary this year will know out of the few banks not to make a loss in the previous year only one high street bank increased its profit. The Co-operative Bank.

Nice one Alistair!

A better way...?

This is pretty much just a cross post from Politics for People, they have posted an excerpt from an interview that Sophi Tranchell, the boss of Divine Chocolate had with Real Business. In which she discussed the future of business and the advantages of a co-operative system.

On Politics for People they highlighted on quote regarding the construction of Heathrow's Terminal 5 as compared to a major renovation of a John Lewis store:

"I remember when John Lewis completed a £100m refurbishment of its landmark Sloane Square store, which involved dropping in a new escalator system into the building through the roof. Not only did the retailer keep the store open during trading hours, but it made more money that year than the previous year. Why did that work while projects such as Terminal Five were such utter disasters? It was because every employee in that store wanted it to work; they’d all been consulted and informed. And they knew that if the company performed well, they’d do well."

It is quite a striking contrast, and the difference in the two models is perhaps better summed up by another comment she made about the Co-operative business model as a whole:

"The dominant model of business over the past ten years clearly hasn’t worked,"

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"So what model does work? While banks such as Royal Bank of Scotland and Lloyds have been crippled in this climate, ethical banks like The Co-operative or Triodos are doing just fine. While retails such as Zavi and Whittard of Chelsea were hurled into administration, employee-owned companies such as John Lewis, Tullis Russell and Loch Fyne are going great guns.

If you judge success as being based simply on profit, as has been the prevailing practice of most businesses, the last couple of years has shown the strength and resilience of the Co-operative business model. When you put on top of that the ethical practices and fair profit distribution of co-operatives their superiority as a business model becomes clear.

Congratulations to the Tenants

The following article appeared in the Press and Journal and was sent to me by my friends at the co-op party so a big thanks to both.

ABERDEEN-BASED Tenants First Housing Co-operative has been named runner-up for a prestigious National Home Improvement Council Award which recognises significant achievements in the UK housing arena.

Britain's largest fully mutual housing co-operative was nominated for the award for best brownfield or recycled building project, focusing on its recently completed Roanheads development in Peterhead.

The former fish-factory site was previously turned down by a variety of contractors put off by considerable levels of hydrocarbon contamination in the ground.

Tenants First saw the site as a prime development opportunity and, following a six-month demolition and clean-up, it now accommodates 45 purpose-built family homes and eight sheltered houses.

The development is also a Homezone project, an initiative which aims to reclaim residential streets back from traffic, with streets designed to encourage walking, cycling and community activity.

A Co-op Solution

Some of the readers of this blog might know that I am a member of the 2 great left of centre political parties in this great nation of ours.

They are the Labour Party, well it is a labour club blog, as well as the Co-operative Party a party that was founded in 1917 and has been working since then to advocate the Co-operative and Mutual agenda at the heart of the political agenda.

As part of that process last week the General Secretary of the Co-operative Party Michael Stephenson had the following article in the Guardian making the case for the mutualisation of the banking sector.

Of all the numerous and painful lessons of the recent collapse in the financial markets, one has been conspicuously missing from the flood of media analysis and commentary.

Bradford & Bingley's taxpayer-funded rescue ended all arguments about the potential benefits of demutualisation. As the last of the ex-building societies loses its independence, it joins other recent arrivals such as Northern Rock and Halifax as the latest addition to this run of corporate failure.

When the last Conservative government encouraged societies to demutualise through the 1986 Building Societies Act, it plundered generations of assets from mutual societies, replacing prudent mortgage providers with some of the worst culprits of casino capitalism.

Today we have a unique and unmissable opportunity to put that right. By recognising the enormous benefits of mutuality and taking action to allow societies to remutualise, we can return those institutions to their rightful position and bring stability and sustainability to the important work they can do for our economy and the millions of Britons who rely on them.

Cooperatives and mutual financial organisations differ from their plc competitors in one crucial respect: they exist to provide mutual self-help for their members rather than to generate profits for investors. These core values drive high standards of behaviour throughout the sector. The absence of external shareholders means there are no conflicts of interest between the claims of consumers and owners, leaving mutuals no incentive to exploit their customers for short-term gain.

In addition, the fact that these organisations operate 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 our financial institutions' previous short-term thinking, this approach to business should unquestionably be the future direction that we are looking for.

A starting point will be the future of Northern Rock and Bradford & Bingley. While the government was absolutely right to nationalise these as a short-term measure, any long-term solution for these companies should be based on some key principles.

• Taxpayers must not be out of pocket as a result of the change.

• Hard-working families and small businesses must be protected. This means the housing market should not be closed to first-time buyers, credit lines to small business should be extended and repossessions should only occur as a last resort.

• The institutions that emerge must be secure, responsible and add to the financial stability of the UK economy.

• And finally, these new organisations must continue to act in the long-term interests of their consumers.

That is why the Co-operative party is calling for the newly nationalised banks to be converted into mutuals. Mutual ownership is the best solution for ensuring a stable long-term future for these companies, and making sure that the risk taken by taxpayers will deliver for consumers in the long-term.

Building societies were founded with one purpose in mind – that of building houses for hard-working families and providing a safe place for them to deposit their savings. It is only fitting that the chief purpose of these businesses should be to do the same, particularly at a time when people are anxious about the security of their savings and will find it increasingly hard to get on the housing ladder.

This could be achieved in two ways. The government could give existing financial mutuals the right of first refusal when it decides to put the institutions it nationalised up for sale. This would maximise the opportunity for a strengthening of the existing mutual sector and help ensure a stability and continuity in the market.

Alternatively, the government could consolidate Northern Rock and its holding in Bradford & Bingley into one institution. When all debts are paid back, the institution could be converted into a building society. This should be straightforward, as the government already owns the share capital. The new body would operate in the same manner as any other building society.

Regardless of which option is chosen, the opportunity is there to rectify the mistakes of the past and deal with one of the major economic and social challenges of our time.