Money Advice Scotland Conference

2 June 2015

Good morning
I am delighted to be in back in Scotland and to be with you this morning.


Building on your new strategic theme of financial wellbeing for the people of Scotland I want to share with you some reflections and some of our strategic thinking.

We are here at the Crieff Hydro less than a month after one of the most closely fought and uncertain UK General Elections many of us can remember.

As the dust settles, the new Conservative government in Westminster is facing up to the reality of a slim majority with the SNP as the third largest party in the UK Parliament.  The publication of the Scotland Bill last week, signals the further devolution that is underway.  With that political mood music I want to talk:
  • A little about the building society sector, and
  • Some of our key themes:
    • the importance of corporate diversity in financial services
    • housing supply and mortgages
    • savings and individual resilience
    • lending into and in retirement

The UK has 44 building societies.

One, the Scottish is based here and six others work north of the border.

All told, societies have over 20 million members, who consistently rate the levels of service they get ahead of that from the rest of the banking sector.

  • Treating me fairly as a customer
  • Making me feel as though my business is valuable to them
  • Offering financial products that are easily understood
  • Providing competitive rates and good value for money
  • Acting in my best interests
  • Treating me as an individual
Across Scotland last year, building societies lent £2.8 billion on 21,000 new mortgages, 5,900 of those to first time buyers with:
  • Societies focusing on filling the gaps after the latest round of mortgage regulation
  • And on meeting less standard borrowing needs, for example on self and custom build
This strong lending trend has continued into this year.  In the face of a fall in lending across the whole market during the first quarter, building societies have taken a bigger slice of a smaller pie.
For the whole of the UK, between 2012 and the end of Q1 2015, net mortgage lending by building societies was plus £44.5 billion compared with £5.5 billion from all other mortgage lenders.

We know it has been tough for savers.  Headline savings rates in 2014 seemed to be pursuing a relentless chase to the bottom.

Building societies typically sought to protect their loyal members, often maintaining rates at a multiple of the bank base rate.


Turning to our forward looking agenda, one important question that we are considering is:

“What is the financial services sector that we want for the UK in 20 years’ time?”


“What are the steps that we need to take now to have the best chance of achieving that outcome?”

The purpose of the question is very clear to me.

What legacy will we leave our children and our grandchildren?  And are they going to thank us for it?

As building societies, we have a clear custodial duty to our members (who are also our savers and borrowers), past, present and future, to take responsibility for the legacy that has been passed down to us and to hand our societies on in a better state than we found them.

The lack of ambiguity in this statement, the lack of conflict between customer and member interests is for me one of the real strengths of the mutual sector.
Inside the sector we have many debates about what the mutual difference is.  But there is agreement that the relentless focus on customers as members and owners, and how this guides decision making and behaviour is at the heart of it.

In an era when the big retail banks are seeking to rebuild their reputations with customer focused strategies.  And the challengers are pursuing strong customer focused strategies too, we sometimes feel a little flattered.
If you didn’t know any better, judging by their advertising campaigns, you might think that they too were trying to become mutuals.

But there is a real difference.

Trying to look like a mutual, having a customer focused strategy, is not the same as being a mutual and having the customer as your owner.

It’s why we are convinced about the importance of:

The role of financial mutuals as an essential component of a competitive and properly functioning financial services sector.

It’s no soft option.  Running a successful building society as every bit as competitive, every bit as challenging and every bit as rigorous as running a shareholder owned bank.

Only different.

And that very difference creates more consumer choice, more product innovation, more competition in the marketplace and, importantly, greater resilience in the whole banking sector in times of crisis.  Corporate diversity is a vital component of a properly functioning market.

Speaking in Singapore last November, Mark Carney in his capacity as Chairman of the Financial Stability Board, said that “the job of agreeing measures to fix the fault lines on which the financial system had been built is now substantially completed.”

He went on to say that “we must now consolidate our progress to build a financial system that can deliver strong, sustainable and balanced growth for all economies, large or small, advanced or emerging – and that achieving these ends requires a financial system supported by the three pillars of diversity, trust and openness.”

We are looking for a level playing field in legislation and regulation.  No special preference, but a clear recognition that the mutual business model is different from the corporate shareholder model, with PLC’s and mutuals considered side by side.

To achieve the twenty year vision of a truly diverse, competitive and resilient financial services sector, we must ensure that our regulators are held to account for their part in supporting an increase in choice and diversity.

It might sound like a strange objective for a regulator.  But we believe that it is in their best interests too, helping them to avoid creating new concentrations of risk and new potential points of failure as they continue their part in restoring confidence and trust across the whole sector.

My vision for the UK’s financial services sector, is for a vibrant and competitive sector with lots of consumer choice.

Financial mutuals, including building societies and credit unions, have as vital a role to play in our future as they have done in our past.

Moving on to housing supply and mortgages

Wherever you are in the UK, housing is clearly an issue.

The issue has many parts, whether we are talking about prices and affordability, or young people getting on the housing ladder.

At the heart of it, though, is supply.  And this is not just about homes to buy.  Having healthy private and social rented sectors too is as important.  In essence it’s about homes for all.

As with the rest of the UK, not enough new homes are being built in Scotland.  House building here peaked in 1970 when 43,000 new homes were built – the vast majority by Local Authorities.
In the twelve months to June 2014, 15,824 new homes were completed, better than the previous year but still not enough.

The RICS recently talked about the chronic lack of new homes coming onto the market becoming a national emergency.  We agree.  And solving it will take a concerted effort of government, private builders, housing associations, local authorities and lenders too.

For our part, many building societies have good working relationships with local and regional builders and are the main suppliers of mortgage finance for self and custom-build across the UK.

This year we are looking to go further with a programme designed to increase the availability of mortgage funding for homes built using modern construction methods.

Turning to savings and individual resilience

The building society sector represents about 19% of the UK’s personal cash savings market.  We place a lot of emphasis on the importance of savings.

The average UK household has savings and investments of £1,205.  In Scotland that is just £670.

So in common with others we have concerns about the lack of individual resilience that many people face when they encounter a personal financial crisis.

Legal & General, in their powerful Deadline to the Breadline report estimate that:
  • Across the UK the deadline to the breadline is 29 days, up from 26 days last year.
  • In Scotland the picture is much gloomier with the deadline to the breadline at just 17 days, way down on the 28 days of last year.
More than a third of people have no savings at all and about the same number have no strategy if the worst should happen.

Their breadline is potentially tomorrow.

People reporting financial difficulties today typically have multiple debts.

Some time, probably next year, the bank base rate will start to rise and that is why we cannot sit on our hands.
This is valuable preparation time, and our members are taking it, particularly to identify and communicate with those they see as under pressure, but pre-arrears.

At last year’s Party conferences, I was pleased to be invited to join panels with the Money Advice Service, the Money Advice Trust, Step Change and Citizens Advice.  To add my support for good access to free debt advice and to emphasise the importance of encouraging even small amounts of saving to cope with day to day shocks - the boiler or the washing machine breaking down.

Talking to one of Glasgow’s taxi drivers en route to visit the Glasgow Credit Union, he was pleased to tell me that he had a few hundred pounds tucked away with the Glasgow Taxi Drivers Credit Union, just in case.  That vital rainy day fund.

Through the Building Societies Trust, we are glad to be able to support a number of charities which provide financial education and training to young people, and support services and advice to those who have hit hard times.

At our Conference this year we were hugely privileged to have a session from a charity called MyBnk on their programmes for financial education and entrepreneurship in schools.  Having seen them in action, I can only say how impressive their programmes are, and how engaged the young people were.

But it is worrying that 90% of people have no personal financial training and that 25% of young people think an ISA is an energy drink.

When borrowers face real difficulty, we recognise the responsibility of lenders to work as closely as possible with them to achieve the best possible outcome in the circumstances.

That is why last year we produced this practical guide on paying your mortgage working with the Money Advice

Trust, encouraging people to:
  • Talk to their lenders early
  • Assess their situation realistically
  • Stay in touch
  • Show that they are willing to pay what they can
  • Explore all their options
  • And take advice from trusted sources
Copies are available outside the hall for those who would like one.

And finally, Lending into and in Retirement

One of the major demographic shifts of this generation is that of the UK’s aging population.

As a NESTA survey recently put it, we are living five hours longer every day.

It is equally clear that as more and more people head for retirement with a defined contribution based pension, the question of how retirement is to be financed and how we enable older people to live their lives with the dignity and choices that we would expect in one of the world’s leading economies, lending into and in retirement is a major theme for the whole financial sector.

With a state pension at £140 a week and an average Defined Contribution pension pot reckoned to be about £26,000 giving a tax free lump sum of £6,500 and an approximate monthly pension of £50-65, we should expect those who are fortunate enough to own their own homes to want to use them to help finance their retirement and, ultimately, care whilst they continue to live in them.

This will present a real challenge, but it is not one we can duck – and I include our Regulators in that challenge.

Financing older age will, I believe, be one of the critical social issues for the remainder of the 21st century.
Which is why we have started a major project involving over 20 building societies, exploring the opportunities, together with the challenges and the obstacles facing those people that need to borrow close to, or in, retirement.

This is all about recognising and responding to social change.

About contributing positively to the social fabric of society as the building society movement has always done.

About defining what really good looks like.
We are well placed to take a lead in this area, making it clear that building societies have a desire to do even more for older borrowers.

Our sector is more flexible in this area than the large banks.  Some societies do not have any age limits or restrictions, dealing with each application on its own merits.

This is natural territory for us.


  • Building societies have and are playing an important role in delivering for real competition and choice for consumers
  • Looking forward there are some important themes to reflect on:
    • diversity in financial services
    • housing supply and mortgages
    • savings and individual resilience
    • lending into and in retirement

I hope you all enjoy the rest of the Conference.  I am happy to take questions.

Thank you

Please click here to view Robin's presentation slides.