Gambling on the X Factor

Those of us old enough to remember the heyday of building societies in the 70s and 80s, regarded them then as staid, solid homes for our savings and the first port of call if you wanted a mortgage. Back in those heady days, in order to qualify for a mortgage, you first had to save with the Halifax or the Abbey National or the Leeds permanent for 12 months or two years. Once qualified, you would be interviewed by the manager and if you passed this hurdle he would deign to place you on their waiting list, which at times was as long as another 12 months!

Thank God for progress I hear you say, although there will be those who consider the above process led to very much more responsible lending to people who had proved they could be responsible borrowers. Building societies were really local or regional savings banks with a very straightforward business model, which as mutual organisations, allowed them to make a small surplus each year in a very controlled environment.

Once they had overtaken the banks as the main mortgage lenders in the UK sometime in the 70s this was never going to be enough for them and, come the revolution, in the form of the Building Societies Act 1986, they were allowed to demutualise and, over time, to offer all kinds of services to their customers whether they wanted these services or not. Predictably, their numbers fell from over 200 in 1986 to fewer than 50 today and only one of any real size and importance (Nationwide). Many have fallen by the wayside due to the hubris of their shiny new boards comprised of city whiz kids (Northern Rock comes to mind) and many famous names have disappeared altogether.

The Halifax, however, still survives, albeit as part of the dreadful mess Lloyds has inherited and which resulted in the taxpayer becoming a major shareholder in the bank. The Halifax now runs a sharedealing service and recently as part of this service has begun to promote “spread trading”, which you might recognise better as “spread betting”. They are even offering free credit in order to induce new customers to take this up. It is understood that more than 80% of spread bettors lose money on a regular basis (I would guess this 80% is made up of the general public), but strangely this statistic does not appear on the website; Halifax are more interested in telling us about the tax benefits when you make money – which won’t be often!

A “service” further from the aims and values of the founding fathers of these august institutions it would be hard to imagine; we can just picture the headlines when some poor “punter” (because let’s face it, we’re talking about betting here) finds himself poverty stricken as a result of ill-advised “spread trading”. As a sign of what the banking business has become in recent years and perhaps as a sign of what it would like us to become , we couldn’t envision a more graphic illustration.