BY DOMINIC WIGHTMAN
Last week while, handily, Donald Trump was hogging the headlines with the US airstrikes on Syria, the Co-op Group slipped out a message to the financial press. Group Chairman Allan Leighton was succinct: the Co-op bank (the Co-op Group’s holding is down to just 20%) was now worthless, a takeover approach still seemed possible (whimsical) and there remained the option of an “orderly failure” for the bank.
Why is this the kind of news that needs burying?
In short, it’s a shameful outcome for the bank, for Co-op and for the Labour Party, which has abused this bank – especially its customers – over the last twenty years.
The Co-op bank is not new. It is just five years away from its 150th birthday after being set up as a mutual to provide banking services to Britain’s working class families. For years, the Labour Party (remember 26 MPs are currently Labour & Co-operative Party) has been linked to the Co-op in name, by reputation, via elected personnel and – here’s the rub – a shared sense of moral superiority.
Just a few years ago, Rob Harrison, Editor of Ethical Consumer Magazine – the self-described “hub of the ethical consumer movement” – and a big supporter of the Co-op bank, told the Guardian, “No one is arguing that the mutual model is superior because people who don’t know a thing are going to sit on boards. We are arguing that it is morally superior because customer-controlled organisations are fantastic.”
The financial links between the Co-op movement and Labour run deep. The funding received by the Co-operative Party (subsumed into Labour in 1927) from the Co-op Group has been significant: annual donations of around £850,000 in the earlier years of this decade, declining to £625,000 per recent, leaner years. This political funding has continued despite the Co-operative Group still recovering from a period of financial mismanagement and members continuing to show concern about how elections to its board are made.
Back in 2013 when the Paul Flowers scandal erupted, the Co-op bank board consisted of 20 elected members from the 7.9 million owner-members of the group and 80 independent societies – an extraordinary arrangement which led to the ludicrous result that those with zero banking experience ended up sitting on the board. People like Flowers.
Former Labour councillor Flowers – who had two previous criminal convictions, one for gross indecency after he was caught performing a sex act with a man in a public toilet in 1981, and another for drink driving – with Labour politicians’ approval somehow passed all the background checks necessary to make it to the top-of-the-tree position of chairman of the Co-operative bank from 2009. Flowers also served on the Co-operative Party’s NEC as an appointed representative of the Co-operative Group’s Board. Labour had their useless idiot at the helm of a bank.
After the Co-op bank lost £700m in the first half of 2013, and then the discovery of a £1.5bn hole in the bank’s finances was made by new chief executive Euan Sutherland in May 2013 (the result of its failure to detect massive liabilities present in the accounts of the Britannia building society, which it recklessly acquired in 2009) Flowers resigned from the bank in June 2013, while simultaneously caught up in a sordid drugs and rent boys scandal.
Even if you put the morality of the Crystal Methodist, former Methodist Minister Paul Flowers, to one side (Flowers is the scapegoat always used as an all-encompassing excuse by Labour MPs) what can ever be morally superior about a bank used as a piggy bank by the Labour Party, which even today dares describing itself as “the only UK high street Bank with a customer-led ethical policy”?
It beggars belief that Labour risk continued association with the Co-op brand when its bank, set up from the venerable Rochdale equitable pioneers co-operative society in 1872, has risked the money of its many working class customers (many traditional Labour, Northern English voters) and is forever associated with one of the most scandalous and corrupt chapters in Labour history. (What would the Rochdale equitable pioneers make of the bank or their Labour-run, sex-gang-synonymous hometown today?) Does Labour somehow believe British voters will be willing to forget the soft loans from Co-op Bank to the party? These soft loans, £18 million over the years, allowed Labour to patch up its finances while enjoying interest charges below the market rate often at moments of financial crisis due to misgovernance of Labour’s finances during the Blair and Brown years. They are one of the causes of the bank’s failure.
What is morally superior about the Co-op bank dishing out £33.2million in cheap loans and overdrafts to Celtic Football Club, which was chaired by former Labour Home Secretary John Reid? What about the £50,000 donation to the office of shadow chancellor Ed Balls from Co-op Group in 2013?
By the same token, why would the Co-op Group continue to risk name association with the Labour Party when, frankly, once they are shod of their now rotten bank, they can carefully rebuild their brand?
Can they rebuild their brand?
The Co-operative Group isn’t merely a large shareholder in the bank, it also sets its “ethical” foundation. It is still represented on the bank’s board and, without doubt, many of the bank’s four million customers are still there because of its historic links to the Co-op movement. If the Co-op bank is heading for orderly failure, the Co-op movement would do well to remove its name sharpish from the bank and immediately withdraw political funding from Labour, which has treated the Co-op and its members with such one-sided disdain over recent years. Just look at the history:
The Co-op was established by self-reliant working people forming a cooperative to give themselves an alternative to the predatory “company stores”, which overcharged stables, and kept the workers in debt. So, the Co-op was a free market (not a communist) solution developed by local people that had aspirations. The trade union movement infiltrated the Co-op and tried to use that group to consolidate its hegemony in Northern England. Co-op’s failure was caused by its success, as it grew too big, too widely (drug stores, undertakers, banks etc.), and it lost local control and accountability. The Labour Party’s national organisation started taking a greater role in national Co-op business. Once they had infiltrated the hierarchy of Co-op, the Co-op started providing soft loans to the Labour party and direct funding for key Labour MPs and officials. This continues to this day. Labour’s meddling peaked under Gordon Brown, who milked the Co-op ruthlessly and effectively forced Co-op officials into the takeover of the failing Britannia Building Society. This was the death knell for the Co-op bank and Paul Flowers was just the cherry on the top of the whole rotting mess.
As it is, Labour has again shown itself to be downright dishonourable when it comes to the working class; dipping into the workers’ bank like an innocent child’s piggy bank until now nothing remains. Its future as a political party right now seems evermore certain: disorderly failure. Extinction for the Co-op bank and Labour beckons.
The lesson for both?
Lust and greed are far more gullible than innocence. While the lustful and greedy lose power, the innocent, at least, maintain their ability to vote.