Committee for the Abolition of Illegitimate Debt

CF: How and when did the campaign against the privatisation of the Royal Bank of Scotland begin?

CB: It started in 2015, following the publication of a report by the New Economics Foundation which I was working for at the time. This report contains a proposal to turn the RBS into a local bank within the framework of the German model of local banks (Sparkassen) and as an alternative to the privatization of RBS which was the only option at the time.

The bailout of RBS cost 45,5 billion pounds to the English tax-payers.

The bailout of RBS cost 45,5 billion pounds to the English tax-payers

This operation was controversial but at the same time there was neither an opposition to the plan nor a demand for the application of some conditions on the lending: the State held the majority of RBS shares (84% in 2009) but the bank did not become a state property in spite of the sizeable economic assistance.

The official rhetoric was such that the state should not get involved in the business of running a bank because the bank has to maintain its independence from state influence. [1]

Whether this statement is true or not, Nick Clegg (the deputy prime minister of the conservative party at that moment) published a memoire regarding previous past bank bailouts and admitted that it was a political choice of the government not to get involved.

At that time when I was working for the banking team of the New Economics Foundation, the RBS became for us a symbol of what was wrong in the banking system. We thought that this case could have been potentially mobilizing, notably during this era of austerity.

RBS became for us a symbol of what was wrong in the banking system

Before the 2015 elections, the government had promised that the bank would not been sold to the financial market Financial market The market for long-term capital. It comprises a primary market, where new issues are sold, and a secondary market, where existing securities are traded. Aside from the regulated markets, there are over-the-counter markets which are not required to meet minimum conditions. , and therefore taxpayers would stand to benefit from a government bailout of the bank.

In 2015 the discourse changed: the government wanted to sell back the bank as quickly as possible and at whatever price (they have never set a minimum price), to the same people that caused the crisis!

Therefore, the conditions to galvanize the campaign were there: the bail-out was the pretext to massively cut the welfare state and social security (to the tune of 20 billion dollars).

We launched an online platform to put in place a petition against the sale of the bank: we gathered 150.000 signatures in just one week!

We often say that campaigning against financial injustice is challenging. This, on the contrary, was a concrete and tangible campaign that deeply resonated with the public.

We also did some media work for the campaign and I believe it was very useful in reframing the debate: the prevailing discourse centered around the timing of the sale and the amount the bank would be sold for, , but there lacked deeper critique that questioned the legitimacy for the sale and if it would actually have a positive impact on the economy. We also started to work with certain members of Parliament (mostly from the left but also some from the conservative Party whose constituency had too suffered from the financial crisis) helping them to understand what was going on. Debates within the Parliament were organized and the governement was forced for the first time to justify its position regarding why there was no alternative to privatization. The government then pushed the narrative that the Sparkessen model was ineffective, citing the failure of the Landesbanks, and of course asserted all the usual arguments used against public banking. But still there were discussions that they have never been held before!

Moreover, I believe that overall the campaign was successful in reshaping the discourse.

CF: To what extent do you believe your message resonated with the public?

CB: Well, strongly with the leftwing who are already quite politically engaged. But I think among that portion of highly mobilized citizens, we found that it was possible to mobilize them as well as other sectors of the population on this issue: it was not difficult to make the parallel between the 20 billion pounds of cuts in social spending and the costs of the bailout-out!

It was more difficult however to mobilize people behind the campaign of establishing a local bank network a year later. To accept the proposal of a local bank and the tangible benefits one can receive from such a network, one has to understand what is wrong with the banking system and why this is one of the way to fix it.

People are very ready to mobilize against injustice but less so for a positive alternative.

CF: What does your proposal for a local bank consist of? How would a local bank be managed?

CB: Our proposal was inspired by the report written by Tony Greenham and Lydia Prieg, and is mostly based on the Sparkassen model: reliable savings bank, owned and intrusted for the public good with a representation of local communities, workers, and small businesses. We proposed the creation of 120 local banks (as in the German model), one for every municipality in the UK. The idea was to build a decentralized network in which local branches would take the decisions regarding where to lend, to whom and it would be integrated into their modus operandi to prioritize lending within their own locality with the goal of supporting individuals and small businesses. Another important point was the necessity for universal access to bank based services as well as ensure that the banks would not engage in the sort of unscrupulous activities , such as derivatives Derivatives A family of financial products that includes mainly options, futures, swaps and their combinations, all related to other assets (shares, bonds, raw materials and commodities, interest rates, indices, etc.) from which they are by nature inseparable—options on shares, futures contracts on an index, etc. Their value depends on and is derived from (thus the name) that of these other assets. There are derivatives involving a firm commitment (currency futures, interest-rate or exchange swaps) and derivatives involving a conditional commitment (options, warrants, etc.). and other complex bank activities.

CF: What is the situation of the bank at the moment?

CB: Interestingly, things have stalled on both sides, and one of the main reasons for this has been Brexit’s impact on the financial markets. The present value of the shares were so low that even the Conservatives could not justify selling off the bank. They could lose nearly 20 billion pounds (what was paid to the bank in the first place). They have found they are not able to sell as quickly as they wanted to. And things have stalled on behalf of the civil society due to the fact that there are not enough people to work on the campaign. Again this is due to Brexit, since it has been dominating the entirety of the discourse of the future of the English economy, making impossible to gain traction for other problems in our society. .

CF: Do you think that there is a hope that the campaign will start again?

CB: The campaign still has potential, particularly now that the governement has been forced to postpone the complete privatization (currently the State still holds 62,4% of the shares). In the 2017 elections, the labor party has written in its Manifesto that they will investigate the possibility of turning RBS into a system of local banks. And seen the political context, I think anything can happen in British politics: it is possible that we could have elections next year, that Corbyn will become prime minister and that this option will be back on the table, besides the potential resistance from the Treasury and the civil servants of the Treasury. But to make sure that the proposal will be back on the table, we will need a push from civil society.

Another thing that could potentially gather some momentum is the issue of small businesses fraud that recently came to light. The Consumer regulator for banks buried a report sharing RBS’non-transparent dealings with small business clients.

They had a global restructuring group that was supposed to help small businesses that were in financial difficulties but it in fact thrust healthy small businesses into bankrupcy. This story came out because the Consumer regulator for banks was afraid of a lawsuit.

Therefore, there is a potential in this story and those littles bussines could have enough political capital to launch a big campaign (in UK local businesses garner significant political influence). Obviously, the challenge there is not only to address the injustices they faced but also to campaign against the privatization and the very reasons why are in this situation.

Thanks to Armen Abagyan for his help in revising this text.