However, long before this battle was concluded, the banks had lost the war. Even before the credit crunch banks had become significantly unpopular due to the ‘unfairness’ of charging customers for getting into financial difficulty. Banks were thought by many to be acting in an under-hand, dishonest fashion. Some high street banks began the dispute by allowing the legal cases to run their course in lower courts, and then failing to challenge them – resulting in (relatively) small payments to bolshie customers. Some banks (eg. Nat West) then changed tack and threatended to close the accounts of those who complained.

In my view, the banks’ position was undermined not by their tactics in the dispute but by the fundamental lack of honesty in the relationship with customers. Let’s be clear: free banking is a chimera. For too long high street banks have been providing a service (which in many cases has been excellent, improving and innovative) to customers without a charge and pretending that there are no costs involved. All the while they cut costs, outsourced administrative functions, closed branches, without ever seriously examining whether a different relationship could be struck up with customers. And as newspapers are finding out, if you tell people something costs nothing for long enough, you lose a sense of value in your business.

The distance that this helped create between bank and customer is further exacerbated by the lack of serious competition on the high street – even before the credit crunch brought a new round of consolidation – meaning that customers do not feel as though there is much choice as to who you bank with. When I was making the decision, as a young teenager, it was between Nat West’s free CD walkman and Lloyds TSB‘s free camera (35 mm, not digital) – hardly a decision which promotes responsible financial management. And the sense that the banks had all the power, and none of the accountability to customers, eventually ended up with the foolish speculation which brought about the credit crunch.

The banks may have won this particular battle but they have lost the respect of customers and will struggle to win it back. It’s a market ripe for a new entrant to break the mould.

Related posts:

1. Dear Brian Hartzer, Nat West CEO

Only strong political leadership can bring about these sorts of changes. Yes, arts and culture are important – although new trends brought about by world events usually take a while to percolate through the system. The media is also really important. And public services and businesses deliver services to people on a daily basis. But, for all the fashionable disinterest in it, politics remains the focus and the force for articulating a vision of the world, motivating people to a cause and bringing about change through a combination of hard and soft power.

Gordon Brown’s speech yesterday only served to underline the lack of change. Not once did he talk about tough decisions in prioritising public spending. He mentioned “cuts” only three times: twice with reference to the Tories and once in relation to targeted tax cuts. More importantly, Brown failed to present me (or anyone else) with any tough choices that confront my life:

• He didn’t ask whether I should sacrifice the convenience and price of Tesco home delivery with supporting local enterprise at my corner shop.
• He didn’t ask if it was wise of me to be looking at some home improvements.
• He didn’t suggest that I should think twice before making a vanity decision to cut off my phone contract early to (finally) get an iphone.
• He didn’t ask me if I could do without £200 a month to invest in a personal pension – or whether I could spend less watching football to give more to charity.

This isn’t just an anti-Gordon point. Tony Blair provided national leadership for some months before becoming Prime Minister. David Cameron has not yet shown any ability to articulate the public mood and provide real leadership on any issue – beyond his personal empty symbolic gestures.

I experienced the lack of leadership – the lack of a desire to change – this morning. I logged into my online credit card account with Egg. The balance, which I reduced to £0 after the collapse of Lehman Brothers, is now pushing beyond the -£500 mark. And I notice the following message from Egg, confirming that they have unilaterally increased my credit limit by £650. Regardless of the fact that I’m earning less now than when I took out the card and they’ve undertaken no assessment as to my ability to pay. The era of responsibility-free credit may have just been through an interregnum.

An unwelcome message from Egg banking

Real leadership means lots of things but includes taking every opportunity to lead – making the most of a crisis. The credit crunch was the best opportunity in a generation for politics to become relevant, to change the direction of our country and stake out a new course for Britain. The opportunity has been missed.

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Thank you for your letter to me as a customer of Nat West.I’m sorry that the following letter is not more entertaining but bank charges makes for a dry subject.

I was surprised to read about it in a full page advert in The Times. I don’t usually get the Times in print so was pleased to have seen it. I was, though, taken aback that you decided to write to me publicly rather than emailing me or posting a letter in the first instance. I would have considered that a more effective way of communicating with your customers.

I’m really pleased that Nat West is reducing the fees charged on unarranged borrowing, although disappointed that it won’t save me the £250 that these fees cost me in the last month.

Unfortunately, I am not able to find out why I was charged these fees. The statement online is insufficiently clear to work out when I went over my overdraft limit. The dates on the statement do not match occassions when my count exceeded its limits. When I used telephone banking they told me that due to a change (which I had not requested) I had to re-establish my access to telephone banking. I hope that not communicating with customers by phone is saving money – if nothing else.

I was concerned to read that you have decided to reduce the charges as a means of supporting custoers “during these challenging times”. It suggests the charges will rise when you deem the challenging times to be over. Close observers of UK banking may rather think that it has something to do with the shaky legal ground of these charges and the threat of action by the Office of Fair Trading.

You are new to Nat West so I won’t hold you responsible for its past performance. If, however, you want to understsand how to continue to support your customers, the following may be of interest:

1. I bank with Nat West because no one else will give me such a large overdraft. That should be a concern to you.
2. When, in times of plenty, I tried to reduce my authorised overdraft, I was discouraged from doing so because (apparently) it would have hurt my credit rating. That was a pity
3. Banks levied these fees / charges in the first place because they are consistently dishonest with their customers: pretending that personal banking can be conducted free of charge. A more honest relationship with customers which reflected the true cost of administering their accounts may have led to a better relationship when fees (fairly assessed) were levy

Moreover, had Nat West not leant money to people who couldn’t afford it (each month I operate only within my overdraft limit. My account has not been in credit for all but a few days in the last ten years – since you gave me an overdraft) it may still be an independent bank. Had Nat West found a sensible business model for personal banking, it may not have had to chase more risky means of making money so it may have been an independent bank. And had Nat West communicated properly with its customers – rather than preferring espensive adverts – it may have had a greater bond of trust with them.

I look forward to your cheaper charges but hope that the tighter margins bring about more sensible, lasting change in the way that you do business. There must be another way.

Yours sincerely,

Matthew Cain

Related posts:

1. Banks win the battle but lose the war
2. West Ham v Liverpool post match analysis

Gordon Brown may want to fight the next election on the basis of investment versus cuts but it won’t work. This isn’t just my opinion, this is a fact. Labour has tried investment v cuts at the last two elections – 2001 and 2005. It didn’t work at either election.

There are all sorts of ways of testing an election slogan – through polling, focus groups, media monitoring, on the doorstep and more besides. But the ultimate test is what happens on polling day. Judging a slogan any earlier is like assessing a football team on paper before the cup final: useful and informative but ultimately inconclusive.

In 1997 Labour got 13,518,167 (43.2%) votes compared with 9,600,943 to the Tories on a 71.5% turnout – giving Labour 418 MPs. The Labour message was ‘things can only get better’. They promised some incremental improvements to public services (no class size of more than 30 for 5,6 and 7 year olds) but also to keep inside Tory spending limits for the first two years and no increase to basic income tax.

In 2001 Labour got 10,724,953 votes (down 2.5%) compared with 8,357,615 for the Tories on a 59% turnout – giving Labour 413 MPs. The Labour message was ‘schools and hospitals first’. So Labour actually lost votes. The message didn’t work.

In 2005 Labour got 9,562,122 votes (down 5.5%) compared with 8,772,598 for the Tories on a 62% turnout – giving Labour 356 MPs. The main message was ‘Forward, not back’ but it articulated a message about public service investment (and reform) against cuts. The message of investment AND reform was important during the passage of the main bills in parliament on public services throughout 2001-2006, partly because it united a coalition of support where merely ‘investment’ concerned some of Labour’s electoral coalition.

General election results are complicated and people vote for a range of reasons. However, investment v cuts has not worked. If it hasn’t worked for other reasons then – ok, let’s give it another go. But there are compelling reasons to believe it won’t work this time either.

1. The public know that the government is deeply in debt. There is a growing discourse which believes that the public sector wastes money. Investment alone is not universally popular.

2. Experts won’t be quiet in the next nine months if the government keeps talking about investment v cuts. The governor of the Bank of England, the IMF, the IFS and more – all will testify that the government needs a plan for getting the deficit under control. The (cautious) support of Paul Krugman will not be enough.

3. It won’t build a successful electoral coalition. The Doctors who have had a pay rise thanks to Labour’s investment are not grateful. The nurses who have had a pay rise thanks to Labour’s investment are not grateful. The administrative assistants who have paid more tax are not grateful.

4. The numbers involved are too big to make sense – and the public don’t trust statistics from the government. The billions of pounds are so many, the sums of cash so incomprehesibly big – and with nothing to compare them to – that the investment narrative and the £20bn hidden cuts talk – just doesn’t resonate.

If David Cameron has decreased the likelihood of investment v cuts being the narrative at the next election, he may have increased Labour’s chance of winning.

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1. The shoes

They all have spectacularly new shoes. Not all of them are shiny and some are casual but the more casual they are, the fresher out of teh box they look. All of them are classy, hundreds of pounds jobs from posh retailers rather than Jones or Office.

2. The hair

Fantastically well coiffured so that every misplaced hair is deliberately so. A smart stylish cut, cut to look casual. And recently cut.

3. The trousers

The trousers (casual, of course) fit perfectly. Most of us find pairs of jeans which are slightly too long, slightly too short or don’t fit ideally everywhere. Not so, bankers. The bottom of the trousers fits against the shoes perfectly, as if the two had been tailored to complement each other.

4. The walk

Chin up, shoulders leading, faster than comfortable, palms forward.

5. Equipment

Bankers don’t carry much to work. An ipod, a coffee and probably an iphone. But the computer is at the desk (or in a nice casual bag) but no laptop bags, no paper falling out of a briefcase.

Disclaimer: This is intended as a ligh-hearted, slightly jealous take on people who dress better (and at higher cost) than me. It is in no way an incitment to attack a banker. If you are so way inclined remember the size of your mortgage, your credit card debts and that bankers merely facilitated your greed.

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