Peter Mandelson wants to set up a "People's" bank, using the Post offices as a branch network. The new institution would have "a clear social purpose."
Behind Mandelson's proposal, there is the usual internal New Labour political calculation. The plan would head off a potential back bench revolt over the Post Office privatisation.
Daft ideas, like this one, are always slipping in and out of fashion. There was once a post office bank called the Girobank. However, it fell out of favour, and it was privatized. Now, as the rest of our financial system implodes, the government wants to revive the Giro and start again.
But do we need another bank?, High streets across the UK are already full of bloated and obese lending institutions. Moreover, wouldn't a Post Office bank have an implicit government guarantee on deposits, and therefore represent unfair competition for privately owned banks?
However, these questions are marginal considerations compared to Mandelson's ominous objective that this new bank should have a "clear social purpose". What Mandelson have in mind? Subsidized lending for the poor? Cheap financing for the government deficit? A People's bank sounds a lot like money pit bank.
State owned banks are always a bad idea. Inevitably, governments misuse them in order to achieve narrow political objectives. Before you can say "we need to help British industry with cheap credit" this bank will be top full of bad performing loans and huge losses.
The private sector has produced enough of those kinds of banks already. We don't need New Labour conjuring up another funny bank to add to our financial sector difficulties.