a RESEARCH
Post Bank Campaign Briefing
The Post Bank campaign is calling for a new publicly owned bank to be set
up, based on the Post Office network, to provide socially useful local banking
to communities and small businesses across the country and secure the
future sustainability of the Post Office. Key principles for the bank:
- it should be publicly owned keeping profits within the business;
- it should deliver a Universal Banking Obligation to ensure access to
financial services in local post offices throughout the UK;
- it should provide a more extensive range of financial services than
are currently available through the Post Office, crucially including
current and business accounts;
- and it should reconnect banking with local communities and provide a
trusted financial service responsive to their needs.
The Government’s position
Gordon Brown, Labour Party Conference 2009:
‘I want the Post Office — to play a much bigger role, bringing banking
services back to the heart of people's communities.’
Peter Mandelson, BIS press release September 2009:
“The Post Office is one of the country’s great assets. It is a trusted institution
that offers face-to-face contact in the heart of local communities. The time is
right to build on these strong foundations and substantially increase the
banking services it offers. Today's announcement will help secure a viable
future for the Post Office network. It is also excellent news for consumers and
small businesses — giving people access to a full range of banking products
at an institution they trust and value.”
Delivering a Post Bank in line with the key campaign principles:
1. The Government should buyout the Post Office’s joint venture for financial
services with the Bank of Ireland.
The Bank of Ireland currently takes 50% of the profits generated from the joint
venture (£34m in 2008/09 and £36m for 2007/08) which is currently
scheduled to run until 2020. A precedent for such a buyout would be Tesco’s
buyout of its joint venture with RBS in 2008 to set up its own retail bank. The
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Bank of Ireland initially invested around £125m in start up costs for the joint
venture and they would want to see a return on this.
2. Incorporating NS&I. The Post Bank could incorporate National Savings and
Investments. In 2008/09 the Post Office brought in 57% of NS&l’s income
from sales. NS&I holds over £97bn in investments and its assets could be
used to give the Post Bank greater financial security and capacity.
3. Northern Rock. The Government is the sole shareholder of Northern Rock
and using it as the basis for a Post Bank would provide access to a banking
infrastructure including a banking licence, mortgage services and banking
expertise, already in the public realm.
The Government is currently awaiting an EU pronouncement on state aid
(expected before the end of 2009) for Northern Rock and its proposals to split
it into a ‘good’ and a ‘bad’ bank, before confirming plans for its future. One
condition the Treasury has placed on this is to get a return for the taxpayer
for the bailout; we would argue that the future profits and the wider social
benefits of a Post Bank would be a significant public gain.
4. Mutual Banking models. A mutual bank or not for profit model such as the
original Trustee Savings Bank would keep profits within the business and
enable more ethical and socially beneficial services to be offered.
Key Arguments for the Post Bank
i. The Post Office has outgrown and outlived the usefulness of the joint
venture and it does not make sense to see it held back and splitting the
profits of its financial services for another 11 years. The Post Office now has
2 million customers with financial products — 50 per cent more than the Bank
of Ireland has in Ireland — and is looking to expand now to capitalise on its
advantage in the market. However, the Bank of Ireland will not provide
current account services through the Post Office until 2011 at the earliest.
Tesco, in contrast, is moving quickly and will be doing so in the second half of
2010.
In the last year the Bank of Ireland’s credit rating has been downgraded and it
has been bailed out by the Irish government, due to estimated bad debts of
almost 7bn Euros. In light of this it is clearly not well placed to advance the
business and particularly to deliver on a ‘people’s bank’. With its network and
higher levels of trust from the public it is clear that the Post Office is now
bringing far more to the partnership than the Bank of Ireland.
ii. A successful Post Bank would reduce and could ultimately end the Post
Office’s dependency on Government subsidy and secure the future of the
network. The current settlement granted the Post Office £1.7bn through the
Network Subsidy Payment over 5 years from 2006-2011 — reducing the
dependency on this would not only reduce Government spending but could
end the risk of further closures. The Bank of Ireland received £34m in profit
last year from the joint venture on limited services — an expanded Post Bank
could significantly improve these, hugely increase Post Office custom and
embed the Post Office Card Account with the Post Office.
iii. A Post Bank would deliver a wide range of social benefits. A new Post
Bank could address the problems of financial exclusion providing services
and financial advice in communities without banking facilities — almost 3
million people are ‘unbanked’ and are vulnerable to loan sharks or would be
forced to pay a premium for basic services; it would provide key services to
small businesses, many of which are currently denied credit, boosting local
economies and employment; and it would reconnect banking with
communities and partner credit unions and local social enterprise initiatives.
iv. A Post Bank has significant business potential and could emulate
successful international examples of post office banking. Many of Post Office
Ltd’s overseas equivalents have developed comprehensive banking services.
The French postal service La Poste launched its bank in January 2006 and
now has over 11 million postal banking accounts; Deutsche Post’s Postbank
is the biggest retail bank in Germany with around 14.4 million customers; and
BancoPosta in Italy was launched in 2000 and now has 5.5 million current
account customers. While these are not like for like comparisons they
demonstrate the business potential for a synergy of post and banking
services.
Conclusion
Establishing a Post Bank would help secure the future of the Post Office and
allow it to capitalise on its potential to provide a ‘people’s bank’. This would
have wide ranging social benefits and prove popular throughout the country.
EDM 1082 calling for a Post Bank has been signed by 219 MPs and the Post
Bank campaign includes the CWU, Unite, the Federation of Small
Businesses, the National Pensioners Convention and the New Economics
Foundation and is working in partnership with the National Federation of
Subpostmasters.
The potential for such a bank and the support from the Government now need
to be translated into concrete action. We must move at pace while we have
the opportunity to deliver the benefits of a Post Bank.
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