Oct 13, 2009
Remutualisation

A strong and vibrant mutual sector must be a key feature of our future economy if we are to avoid the mistakes of the past. Our Government was right to take the action it did in ensuring the survival of the banks in the short term, including taking some into public ownership. We should remember though that some of the nationalised banks were once mutuals. The Tories allowed for the demutualisation of these venerable institutions during the 1980s and early 1990s and, subsequently, they have failed. When we consider the future of these banks, we should bear in mind their pasts; that way we will not be doomed to repeat them.

A starting point will be the future of Northern Rock. While the Government is absolutely right to take any ownership measures it sees fit in the short-term; any long term solution should be based on some key principles:

  • Taxpayers must not be out of pocket as a result of the change.
  • Hardworking 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 we believe that all fully nationalised banks should be converted into mutuals. Mutual ownership is the best solution for ensuring a stable long-term future for these companies, and ensuring that the risk taken by taxpayers will deliver for consumers in the long term. At a time when people are anxious about the security of their savings and finding it difficult to get on to the housing ladder it is only right that taxpayer investment is rewarded with a return to customer ownership. 

The same principles could also be applied to those failed banks in which the public has a considerable stake. It would be undesirable for institutions that have failed to adequately protect their savers to be allowed to risk deposits taken on the ‘casino’  functions of the market for a second time. We therefore believe that the Government should explore all possible ownership structures when determining the long-term future of these companies – including splitting them into retail and investment arms and placing the retail banks into mutual ownership.