John Harris

Ethical consumerism, once again, has turned out to be a crock. Perhaps we should have seen it coming

“The conversion of Co-op Bank into just another bank owned by professional investors has the potential to fundamentally alter the bank’s ethos and culture,” says the BBC’s Robert Peston – and obviously, that threatens to be a hilarious understatement. Twitter is filling up with posts that suggest the loss of a dear friend, and another win for the most venal kind of capitalism; the Unite union reckons that what has happened is “dreadful for the staff, customers and the wider banking industry”. If you are one of those people – like me – who has long thought that banking with the Co-op amounted to a small stand against the chicanery and stupidity of Finance Capital, you are likely to be feeling ever-so-slightly dazed.

The two hedge funds that have played the lead role in forcing the wider Co-op group to give up control of its banking arm are Silver Point Capital and Aurelius Capital Management. They lent money to the bank, and now their bonds are to be converted into shares – which, at a stroke, seems to imperil many of the ethical credentials that gave the Co-op Bank its unique selling point.

As it stands, for example, thanks to an ethics policy introduced in 1992, the bank is pledged not to assist “any business whose core activity contributes to global climate change, via the extraction or production of fossil fuels”. It does not take long to discover that among its many investments, Silver Point – which was founded by two alumni of Goldman Sachs – has holdings in the American petrol company Sunoco, and Sun Coke Energy, “the largest independent producer of high-quality metallurgical coke in the Americas”. As far as Aurelius is concerned – and I stand to be corrected here – fossil fuels do not seem to be a direct issue, but Co-op customers are likely to feel at least a frisson of unease about, say, this “distressed debt” specialist’s extensive dealings with those well-known practitioners of business ethics the government of Dubai.

In other words, despite assurances that the Co-op group will now be “embedding … co-operative principles in the constitution of the bank”, things already look very messy indeed. How does anybody build anything remotely co-operative into a business now majority owned by standard-issue investment companies? Moreover, some very important aspects of the bank that have seemingly combined ethics with creditable customer service are now looking fragile, to say the least. Thousands of redundancies are said to be inevitable; how long the admirably efficient and responsive call centre in Stockport – as against an outsourced version in some suitably low-wage territory – will last is anyone’s guess. By way of warning, a Guardian piece quotes Andre Spicer, a professor of organisational behaviour at Cass Business School, who says this: “History suggests that once a mutual bank is privatised it drops the focus on doing good to focus on doing well for shareholders. Many ex-mutuals became some of the worst offenders in the lead-up to the financial crisis.” They certainly did: Northern Rock springs to mind, along with Bradford and Bingley.

Rather than being itself a mutual, the Co-op bank was wholly owned by the mutualised Co-op group – which, as most of its account-holders seemed to believe, was good enough. It meant that the bank had strong links with the labour movement, along with decent bona fides not just on climate change, but also on the arms trade, tobacco, and more. A Guardian news piece from 2006 reports the Co-op Bank losing £10m of business thanks to its moral qualms, which included a refusal of help to a firm that made furry sporrans.

The story of the bank’s demise is simple enough: a steady-as-she-goes business model was nudged to one side by hubris. The die was cast when the Co-op Bank merged with the Britannia Building Society in 2009, and thereby took on a great deal of bad debt: in 2012, £351m of the bank’s £469m losses were traceable to assets once held by Britannia alone. By that point, the bank’s plan to take over former branches of Lloyds was starting to come to grief, and the ambitions of the Co-op’s then-CEO, Peter Marks, were already looking very ill-advised. “People have lost trust in the financial services sector. Now we can provide a big bank, a challenger bank, that people can really trust,” he said. So much for that.

Ethical consumerism, once again, has turned out to be a crock. Ben And Jerry’s gets eaten by Unilever; Innocent Drinks by Coca-Cola; The Body Shop – if it was ever truly “ethical” – gets bought out by L’Oreal. And now the bank founded as the very embodiment of proletarian self-help and a different model of business ends up being run by hedge funds. To use a slightly dodgy analogy, standing one’s moral ground in the midst of free-market capitalism might be a delusion akin to the idea of Socialism In One Country: if you believe in the usual left-liberal bundle of causes, politics is probably the best arena to pursue them, rather than fixating on what you do with your money.

And me? I’m a bruised Co-op customer, and I’m staying put, largely because switching accounts long ago proved to be a huge headache. But what the hell: I buy my electricity from SSE, my train tickets from the First Group and my petrol from Texaco. I will now stop feeling smug when I reach for my royal-blue Co-op debit card: as Paul Weller once put it, the world’s insane, and we’re all to blame in a way.