An Oxford University report is calling on the coalition government to promote mutuals in order to aid economic stability in the financial system.
The report, to be launched at all three major political party conferences, argues that a stronger mutual sector would promote effective competition and mitigate against systemic risk. It urges the government not to return to the ‘business as usual model’ for the financial services sector, which proved such a risk to the economy.
The report produces a raft of recommendations to help the government to support its Coalition Agreement commitment to foster diversity in financial services and promote mutuals.
Key recommendations from the report include:
On Financial Regulation:
• Making a binding requirement for the new Regulator to promote diversity of ownership
• Appointing a new Head of Mutuals Policy, to co-ordinate the Regulator’s work with mutuals
On HM Treasury policy:
• Appointing a Minister for Mutuals, with a suitably senior support team to work across Government departments
In the foreword to the report, Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, said: ‘Building societies, friendly societies, mutual insurers, co-operatives and credit unions all have long traditions of providing an alternative to shareholder owned businesses and provide choice and competition that is valued both by consumers and by the government. I welcome this report as a contribution to this crucial debate as to how we can best deliver a stable and diverse financial services sector.’
Report author Professor Jonathan Michie, Director of the Oxford Centre for Mutual and Employee-Owned Business, said: ‘The government must not allow the UK’s financial services sector to return to the “business as usual” model that has proved so costly to the economy and to public finances. Already we have seen a return to the bonus culture, which is fuelled by profits boosted by the increased market power of banks which have been rescued by the taxpayer. It is vital that the banks face competition from mutuals, which would also reduce the risk of the credit crunch being repeated.’
