Monday, 23 February 2009

EU more socially democratic than New Labour

For some time, I have felt that the government should have revived Girobank, which operated through the Post Office network. As some of you may remember, Mrs Thatcher privatised the bank, selling it off to the Alliance & Leicester Building Society in a closed deal. Having absorbed the customers and their funds into its main mortgage base, A&L cut the post office connection and quietly merged Girobank with Sovereign Finance. The name finally disappeared in 2003. The success of the financial choices made by A&L and indeed the overall strategy initiated by the Conservatives, continued by New Labour, may be judged by the fact that A&L was taken over by Banco Santander of Spain last year.

To be fair to Labour, the new government accepted that there was a continuing need for a basic bank account, readily available to all. However, instead of building on existing expertise within the public sector (such as in National Savings & Investments), Blair and Brown maintained the Tory aversion to public enterprise. In 2001, they gave the contract to operate the Post Office Card Account (POCA) to Bank of Ireland. (This is now part of a Republic of Ireland bank rescue scheme.) Moreover, government support for both the POCA and post offices has dwindled and only the collapse of most of the deregulated high street banks has reprieved them.

Now, the European Commission has launched a public consultation on "Financial inclusion: Ensuring access to a basic bank account". Internal Market and Services Commissioner Charlie McCreevy is quoted as saying: "Evidence shows that today many Europeans are still not guaranteed access to a basic bank account, leading to a greater risk of economic and social exclusion and preventing them from enjoying the full benefits of the Internal Market. We are determined to explore ways to remedy this situation. This public consultation will allow the Commission to gather views and ideas on this issue in order to assess whether an EU policy response is needed."

GIRO originated in continental Europe, and the pioneers of the scheme in the UK envisaged close links between GIRO systems across Europe. Easy money transfer for small businesses and holiday-makers across national boundaries was one dream. Perhaps we are about to start realising this.

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