Interesting news today that the Co-op bank is paying “hundreds of thousands of pounds” to Reputation management company Quiller Consultants, while slashing support for charities, including the Co-operate Women’s Guild and Mutuo, the co-op’s thinktank. This is apparently as a result of a £1.5bn black hole in the banks finances – due in large part to the bank investing in toxic sub-prime mortgage investments. Co-op’s troubles led to it losing its mutual status in the summer, when US “vulture funds” swooped in to make a killing.
By Margaret Ferguson Burns (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons
The Co-op group is and has been historically very closely linked to the Labour Party. Actually over 30 Labour MPs are Labour and Co-operative Party MPs. Former shadow environment secretary Mary Creagh is one such MP. These MPs receive financial support from the Co-op but I suspect the ties run much deeper, as the Co-op also directly or indirectly employs many labour supporters and has over 7 million members, many from traditionally labour supporting communities.
The Co-op bank has now effectively been taken over by city investors and US Hedge Funds. Co-op group (and its members) has just 30% of its shares. The new owners have appointed Quiller Consultants to start work to reconstruct the reputation and image of the bank – but who are Quiller Consultants? Quiller were created by PR and Lobbying guru Jonathan Hill – who is also known as Cabinet member and Leader of the House of Lords, Lord Hill of Oakeford. Here are some of their other clients. Hill is also a former Tory campaign director.
It’s also interesting that, unlike RBS, Lloyds NatWest or HBOS, Co-op Bank did not get a taxpayer funded bailout, but instead was left to be gobbled up by private investors, including US hedge funds which turned a tidy profit on the deal.
Some conspiracy theorists might make connections between influential city folk and tory strategists seizing opportunities to divest Labour of a key funding source and supporter base. I’m sure it is all coincidence though.
A few things – first of all, the Co-op didn’t just make dodgy investments. It bought another financial institution, the Britannia building society in 2009, without doing proper due diligence on the books, leading it to essentially import huge quantities of raw financial sewage onto its balance sheet. It then tried to conceal the state of its books from both customers and investors for a number of years, including last year when it played around with its profit figures to make it look more healthy than it was. It then, in full knowledge of its balance sheet being in less than rosy condition, entered into a bidding war to win 600+ branches from Lloyds. The Co-operative Bank behaved in an extraordinary manner that surely put paid to its often repeated line of being an “ethical bank”.
Secondly – it was never a mutual. The Bank was owned by a mutual, rather than its customers; it sounds semantic, but it’s an important distinction to make.
Finally, the government announced there would be no more bailouts, and, what do you know, there were no more bailouts. This was despite the Co-operative Bank, when finally forced to own up to the state of its balance sheet, essentially trying to hold its small bondholders to ransom in order to force the Treasury into creating a “Plan B” which would have involved ploughing taxpayer’s cash into the bank.
In short, the Co-op was just another bank. If we feel that bailing out larger banks who had behaved in an unethical manner was wrong, why should the Co-operative deserve a return to the old system just because it makes pretensions about being ethical and donates to a major political party? Frankly, their behaviour says to me that the bank deserves to have been the victim of this fate, because they lied so comprehensively, while maintaining that they were different and better than the other banks.
Thanks very much for your comment Tim. That the Co-op bank fell short of its own ethical stance is clearly true – and its leadership have to take responsibility for its behaviour in recent years.
I’m still interested in the implications for Labour and their dependency on Co-op funding for their Labour and Co-op MPs; and what role the City and the Tory party have played in separating one from the other.