A Decentralised Financial System

Apparently the Labour party will launch their manifesto for the Westminster election with a commitment on banking reform. As someone who has based his campaign on wholesale banking reform, unless the Labour party adopt the proposals outlined on my home page their commitments will be nothing more than spin masking a business as usual approach. We know they have already ruled out a unilateral levy on corporate banking profits, as well as divorcing commercial and casino banking – so I’m not exactly holding my breath.

In the Western Mail today there is a very interesting piece asking key commentators in Welsh public life what they would like to see the party’s put forward this week in their manifestoes. Wisely, they asked Geraint Talfan Davies for his opinion. Geraint is the sort of commentator I always take notice of as he actively challenges orthodoxies. I very much hope to be a politician in the same vain.

In his comment Geraint talks of the need for a more decentralised financial system. When I ask local business figures about what sort of policy interventions they think we need to implement to help local businesses they also call for a local financial platform to underpin local development.

In simple terms the economy currently it seems to me is structured like a giant sieve, with money (and hence wealth) from local communities pouring out of local economies in the nations and regions of the UK into the South East of England. This is due to Labour/Tory infatuation with the square mile and a very centralised financial system, and their obsession with big business. The result has been wealth polarisation at an unimaginable scale at both regional and individual level. It’s no accident that inner London has a GVA rating of well over 300% of the EU average; whilst West Wales and the Valleys less than three hours down the M4 is amongst the poorest areas of the EU with a GVA rate on around 70%. Its sobering that Labour’s core response to the melt down of the financial system will lead to increasing wealth polarisation. It seems that the only part of the UK economy that is ring fenced from cuts are the speculators and spivs that caused the recession.

I have been giving the idea of a more decentralised financial system a lot of thought over recent months. We know in the US they have a strong structure of Credit Unions and local Community Banks able to challenge the major national banks. Following the recession, there has been a coordinated ‘move your money’ campaign, calling on people to literally deposit their money in their local banks in order to avoid another financial catastrophe.

It seems to me that we need to plug the holes in our economy to encourage local money circulation. The key to this is a business model that promotes local small and medium sized enterprises and a local financial system to provide a platform under the local economy.

The Welsh Government in promoting an all Wales approach to credit unions has begun the work. We need to build on these fledgling structures. Personally I think there could be a case for unifying Wales’ Credit Unions under a common branding so that they are no longer seen as the last resort of the poor but the choice of the mainstream. Key to this would be ensuring that the decentralised financial system is sufficiently capitalised. A worthy cause for a 10% corporate social responsibility levy on the big banks some might argue!

One Response to “A Decentralised Financial System” [latest first]

  1. Da iawn, Jonathan!
    This is an excellent article that shows that Plaid Cymru is thinking seriously about how to regenerate the Welsh economy by restructuring the local financial system. In the final analysis, we in Wales, if we want to progress the ideals of a society that protects the disdavantaged and sustains a high level of public service, have to take charge of our own affairs.It all starts with local or regional control of our money.
    Although the idea of ‘unifying’ and rebranding Credit Unions is a good one, we need to go much further.
    The existing Credit Union structures are not ‘fit for purpose’ at the moment. There needs to be staffing and management by professional people who understand money. There also needs to be formalised committment from County Councils and large institutional organisations (such as hospitals) to redirect their payroll through a local credit union (as happens in the US). This provides serious capitalisation and ‘money flow’ – an essential ingredient of any proper solution.
    I can say with certainty that such a solution would be ‘business friendly’ and if explained properly to the electorate could initiate a ‘move your money’ movement in Wales on a scale that would lead to a benign revolution in the way business is financed. This in turn could lead to a sustainabale regeneration of our economy at the local level.
    There will be many arguments about this, not least from the banking sector (surprise surprise!), and also from government saying we don’t have the powers to introduce these solutions in Wales. In actual fact we don’t need ‘extra’ powers from Westminster to do this; there are no technical or legal barriers to us deciding to adopt different ways of managing the finances of the economy. It just requires the political will, vision and leadership to encourage just one Welsh county council and just one local credit union to adopt the solution. This will open a floodgate of people and businesses ‘moving their money’, relieving an irresistable pent up force of frustration and fury at the current system.
    Plaid Cymru wants to be taken seriously by the business community – proposing and implementing a new financial platform for business will command interest and respect especially if it is not ‘re-inventing the wheel’, is do-able quickly and has real potential for economic regeneration.

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