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What should Labour do with the Financial Sector?

Pat Byrne, joint organiser of a new campaign, reports

READERS OF LABOUR BRIEFING WILL BE ONLY TOO AWARE of the problems posed by the existing ownership and practices of Britain’s financial sector. These problems were well documented in the Fire Brigades Union pamphlet It’s Time To Take Over The Banks penned by Michael Roberts and Briefing editorial board member, Mick Brooks.

Now that we have a new Labour leadership, we have the potential to tackle this. Their proposal for a National Investment Bank is a welcome initiative but is also poses important questions. In particular, it leaves open what should be done about the existing banks, insurance companies and pension funds. It is this question that is addressed by a new international campaign for a Democratic Public Banking Service - www.democraticpublicbanking.org

The financial sector is too important to the economy and society to be left in private hands and controlled by a tiny elite of self-serving and corrupt directors. The disastrous losses of 2008 which continue to drag down the economy and public finances, and the huge scandals that have followed, show that private banks and financial institutions cannot be left to dominate the economy and Parliament as they do now.

But just changing formal ownership of the banks would not be enough, as we saw when the government took over RBS and Lloyds and nothing changed. Instead, we need a new democratic form of public sector governance that puts the workforce, users, and the wider community in charge. With a democratic public banking service we could create a financial system that, instead of using our bank accounts, life insurance policies and pension funds to siphon tens of billions into the pockets of the super-rich, would reinvest it in the economy and into providing financial services to the public and small businesses. Imagine the possibilities – creating jobs and building houses, providing loans for start-ups and innovators, abolishing banking fees, introducing low interest public service credit cards and reducing mortgage rates – these are just some of the benefits that a democratic public banking service could deliver. They are also ideas that could make a Labour manifesto much more popular.

On the macro-economic level, a publicly owned and run financial system could not use our money to gamble on foreign exchanges, shares and financial instruments, endangering the whole economy in the process. Instead it could be part of a democratic plan for building the economy that was fully integrated with Labour’s new Public Investment Bank.

In the existing financial system, a huge amount of money is lost not only through lavish profit-taking, bonuses and commissions, but also through massive waste and duplication – just consider all the expensive property tied up in thousands of lookalike high street branches, or the major marketing budgets wasted on promoting virtually identical services. Then there are the tens of thousands of financial services staff providing these duplicated services at local and national level. In a more efficient and rational sector such staff and resources could be far better employed in offering support services, such as genuine advice and financial assistance for individuals and small business account holders.

Of course, the idea of a democratic public banking service raises many questions. How would such a new service work with smaller, co-operative and mutual banks, as well as insurance companies and pension funds? How best to positively govern the creation of new money, internet banking and virtual currencies? And how would the principles of a democratic public banking service be extended on an international level?

To discuss these and many other issues, the campaign will be bringing together a range of people including trade unionists representing the finance industry, radical economists, progressive consumer and small business organisations, political movements and pressure groups.

For more information: contact@democraticpublicbanking.org or join our Facebook community at: www.facebook. com/democratic.public.banking.service

 

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