John McFall says farewell: Co-operative News


There is arguably no one in the UK in a better position to give an overview on the global financial crisis – nor, specifically, the impact on the mutual sector – than John McFall.  As a Labour and Co-operative MP, John has been chair of the House of Commons Treasury Select Committee, overseeing many hours of expert witnesses’ evidence as they tried to explain and analyse the near collapse of capitalism.  McFall, who steps down as an MP at the General Election, took time out of his busy schedule to speak to the News.


Mutuals, believes John, have survived the test of the crisis is reasonably good shape, not least because they relied on members’ own savings for their lending, rather than borrowing from other banks.  “I think they have emerged very well in terms of their business model,” he says.  “Their model restricts them going to the wholesale market to the extent that PLCs did.  But in the post-crisis environment, where size still matters, where the cost of borrowing matters, building societies are feeling the strain.”


But recognition that mutuals have been placed under specific stresses by the crisis has not caused McFall to lose confidence in the sector.  “Not at all,” he says.  “The big lesson, the slogan we should use, is ‘back to the future’.”  As an example, John points to the fact that he is giving the keynote speech at the 175th anniversary celebrations for the Airdree Savings Bank – an organisation that is effective and successful, using the principles of mutuality, collective support and with a not-for-profit ethos.  It is now the only remaining independent local savings bank – a reminder of a once significant mutual sector.


“There must be lessons,” says John, reflecting on the crisis.  “I think we have room in the market for a variety of models, including the mutual model, whose first priority is their members.”


One of the questions, though, is whether organisations that operate for the collective good of their members need themselves to operate collectively – whether in a market that favours the mega-banks for their low cost of operations, their (theoretically, at least) ability to spread risk across activities and with a lower cost of borrowing, mutuals need to find better ways to work together, to reduce costs and improve their ability to raise capital.  John believes they do.


“They do need to work together to get economies of scale,” explains McFall.  “That would be beneficial for the members.  Given the structure of banking at the moment, we do need more competition and more [variety of business] models.”


In this, John is speaking not only about the state of the personal banking and investment banking markets.  He refers also to the restricted ability of small and medium sized enterprises to borrow in an environment when banks are unwilling to lend, especially to higher risk borrowers.  “We need alternative forms of lending to business and the regions,” says McFall.  Specifically, he believes, mutual lenders could potentially fulfil the role undertaken in Germany that has kept lending to SMEs going.  “We need to rebalance the economy,” argues John.  “The needs of SMEs are not being catered for.”


The focus now needs to be on understanding what went wrong and correcting the weaknesses in the structure of the banking industry.  This is why John took the initiative (with Which?) to create the Future of Banking Commission, with an objective to achieve a broad political consensus behind reform proposals.  The former Conservative shadow home secretary David Davis is chairing the Commission, Liberal Democrat Treasury spokesman Vince Cable is another member, as is John himself.  Other big hitters are also members. 


“I am concerned about the lessons being learnt,” admits McFall.  “That is one of the reasons I have established the Future of Banking Commission.  I want a wide group of people to look at this issue, engage with the public and society and keep the debate going politically.  I think it has to be on the agenda.”


The Commission will remain a priority for John McFall after he ceases to be a Labour and Co-operative MP for West Dunbartonshire after the General Election.  But in the run-up to the election, John insisted that he had not decided what he would be doing afterwards.  “I don’t feel my job has been done until May 7th,” he says. 


John has become one of the most senior political figures, a privy councillor, close to Gordon Brown and very influential in the debate on reforming the banking system.  When he steps down, the movement loses a powerful advocate.  But his role in keeping a watchful eye over the welfare of the mutual sector means that John has cemented an important place in the history of the movement.



The career of John McFall


John McFall was first elected Labour and Co-operative MP for Dumbarton (now West Dunbartonshire) in 1987.  He steps down as an MP at the General Election.  Before becoming MP, McFall was a school teacher.  As an MP, John has been an opposition and government whip, a minister in the Northern Ireland Office and has been chair of the Treasury Select Committee since 2001.  In that role, he has proved highly capable in challenging the activities of the banks, their actions in causing the global financial crisis and also in challenging the Labour government, for example in its ending of the 10 pence starting rate of income tax.  John has also, on behalf of the Treasury select committee, strongly advocated financial inclusion and the fair treatment of banking customers.  For his work as chair of the Treasury committee, John has been recognised with awards, including from the Which? consumer group.  Throughout his political life, John has been a steadfast supporter of mutuals.

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