This paper is a collaboration between Common Weal, Friends of the Earth Scotland, Move your Money and New Economics Foundation. Author: Gemma Bone.
The report makes the case for:
Not-for-profit “People’s Banks” should be established in Scotland’s regions to offer banking services to local people and business.
Local banks would be part of a “People’s Banking Network” to share risk and cooperate on training, marketing and the operation of key services such as payments systems.
A “Scottish National Investment Bank” would help establish these institutions by offering seed funding and structural support. The bank would be institutionally independent from Government but publicly owned, and mandated to promote through its lending sustainable development and employment.
Gemma Bone, Ric Lander
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Scotland’s banking system is unstable and unfit for purpose. In 2008, led by Scotland’s RBS, the UK banking system collapsed and formerly private banks required £1,162 billion of support from the UK Government. The crisis cost the UK economy as a whole up to £7,400 billion.
Eight years have passed since the crisis and our banking system is broadly unchanged. Scotland has an extremely highly concentrated banking sector and Scotland’s banks are not providing the services required by people or business. UK-‐wide 2 million people do not have a bank account and there are now 1,500 communities with no access to banking. Evidence suggests that the poorest are the most likely to lack access. Small businesses are neglected, and what lending is available is disproportionately focused outside of Scotland.
Our banks are not providing sufficient funds for much-‐needed infrastructure. Our banking system is structurally unable to fund “patient capital”, i.e. low-‐return but potentially risky investments, like those which are needed to stimulate the transition to a low-‐carbon, sustainable economy. Instead, billions are channelled into property, inflating asset prices, as well as unsustainable industries such as coal mining, the manufacture of nuclear weapons, and speculation on food prices, a practice which is fuelling global malnutrition.
― Not-for-profit “People’s Banks” should be established in Scotland’s regions to offer banking services to local people and business.
― Local banks would be part of a “People’s Banking Network” to share risk and cooperate on training, marketing and the operation of key services such as payments systems.
― A national investment bank would leverage Scotland’s existing infrastructure budget to invest in projects which private banks are unwilling or unable to fund. We argue that with only a modest 6.5% (£225 million) of the Scottish Government’s capital budget invested as subscribed capital this new bank would leverage a total of £3.4 billion to invest from year one. Scotland’s local government pension funds, valued at £28 billion, could invest in bonds issued by such a bank, giving them a reliable mechanism through which to invest in local infrastructure.
― The Scottish Government should convene a taskforce to examine these proposals in greater depth, bringing in a wide range of stakeholders to include Scottish Enterprise, economic development agencies, existing local and municipal banking institutions, credit unions, civil society groups and local authorities.
― The taskforce should commission legal and regulatory advice on how a Scottish National Investment Bank could be created, to underpin the creation of a People’s Banking Network for local, democratic banking in Scotland.