A successful economy needs a banking system that can support fair and sustainable economy. But UK banks are doing the opposite.
Most UK bank lending does nothing to support the productive economy. Instead it goes towards property and financial speculation, which pushes up house prices and makes financial crises more likely. Uncontrolled lending leads to spiralling debt. And when crises hit, bank credit dries up, leaving the government with no choice but to fund without expensive government bailouts.
Banks can create money, by extending loans without finding reserves to back them first, because of this government guarantee. This privilege hands private banks an equivalent subsidy of around £23bn every year, according to research by the New Economics Foundation (NEF).
This needs to change. While we welcome measures to improve financial stability – such as enforcing higher capital adequacy ratios under Basel III – we believe only systemic change will bring about the financial system we need.

Positive Money is part of a wider movement, including the Transforming Finance Network, calling for a reassessment of finance’s role in society. We need a money and banking system that funds sustainable, productive economic activity, not speculative and volatile investments that only benefit the few.
This means bringing about a revolution in banking. It means restoring democratic control over money creation and where that money is spent into the economy. It means encouraging a new and diverse ecosystem of banks. There is also a role for public finance, both to fund sustainable investment – energy efficient homes, infrastructure, and public education – and to guide private finance towards these areas.
Several proposals have been made by the Network and its member organisations, including:
- The New Economics Foundation (NEF) reported on how ‘stakeholder banks’ – including co-ops and credit unions – boost financial stability, local development, lending to businesses, and financial inclusion.
- A financial transactions tax, promoted by the Robin Hood Tax campaign, would discourage the speculative trading that takes place in financial markets, banks included.
- Common Weal and NEF advised on the blueprint for the new Scottish National Investment Bank, based in Edinburgh. The Bank will focus on innovation, productivity, and inclusive growth.
Finally, Positive Money’s own work on a Sovereign Money System would see the power of money creation come fully under democratic control, while banks remain able to settle payments and act as an intermediary for investors. This is an ambitious system change and in 2018 we plan to launch a research website to continue work on a Sovereign Money System
