Under a Labour government, there will be a level playing field for low-risk, member-owned organisations that reinvest their profits, say Tulip Siddiq and Joe Fortune
The Labour Party’s financial services review was an important step in outlining Labour’s plan to work hand-in-hand with businesses and the financial services sector to drive economic prosperity.
The review reaffirmed our first priority in government: to provide a secure platform for growth which builds on the strengths of our economy and gives citizens across the UK financial stability.
A key aspect of the review was our commitment, in partnership with the Co-operative Party, to aim to double the size of the co-operative and mutual financial services sector under the next Labour government.
The co-operative and mutual financial services sector in the UK centres upon building societies, credit unions, friendly societies and mutual insurers. These institutions are enduring and strong aspects of the UK financial services sector which have significant market shares in products such as mortgages, insurance policies and increasingly the proportion of physical branches (in 2012 building societies had 16% of UK branches – today it’s 38%, for example).
The Building Society Association believes the culture, behaviour and decisions at building societies and credit unions are different because they are customer-owned organisations. These institutions are member-owned – there are 26 million building society members alone – where profits are reinvested into their businesses and their different ownership model enables them to take a longer-term view which can be reflected in the products they offer. Building societies, both large and small are sustainably capitalised and are seen to be low-risk institutions.
Within the Financial Services Review it is identified that the co-operative and mutual financial services sector has a key role in driving and underpinning growth across the UK – it’s no coincidence, for instance, that all major building societies are headquartered outside London.
But too often ill-fitting legislation and regulation has held the co-operative and mutual financial services sector back. This is not unique to the mutual financial services sector but one the wider co-operative sector suffers from. This is not the case in other countries; where for instance France and Germany have sought to support and grow their mutual financial services sector. Contrasts between the UK and the mutual financial services sectors in other European economies demonstrate what an enabling environment can deliver.
The review has set out measures which will help underpin rapid mutual financial services growth. They include new requirements on regulators and policymakers to properly consider the needs of mutuals and actively reduce barriers to their growth; supporting calls from the sector to modernise the Building Societies Act to level the playing field with the wider sector; supporting credit unions to offer more products; and strengthening the SME bank referral scheme to support businesses securing financing from alternative sources including co-operatives and mutuals.
Together with the Co-operative Party and wider co-operative and mutual sector, our ambition is clear: under the next Labour government the sector must be supported so the vital contribution it already makes to our economy can go further and help drive the economic growth we desperately need.
Tulip Siddiq is shadow city minister
Joe Fortune is general secretary of the Co-operative Party