The Move Your Money campaign, launched in February 2012, was designed to transform widespread public anger with the big banks into active support for ethical and mutual banking in the UK.

This small industry was systematically gutted following the big bang financial deregulation of the 1980s, leading to the closure of hundreds of small banks and building societies and the consolidation of the financial market within just four too big to fail high street banks.

Within the first six months of this year, the campaign saw more than half a million personal customers close accounts with high street banks, moving their money to mutuals, ethical banks and credit unions. The next stage for the campaign is to encourage and support institutions to move their money out of the four largest high street banks. A large part of this work will focus on local authorities.

Local government finance could be on the verge of a revolution, with the Commons political and constitutional reform select committee already leading a debate on the benefits of codifying the relationship between central and local government. This Magna Carta would guarantee councils’ legal and financial independence from Whitehall, establishing a legal status for councils and granting the freedom to raise and spend revenue in any legal way open to individuals or companies (subject to local consent).

A council-focused Move Your Money campaign would further both of these fundamental aspirations – greater independence for local government from the centre, and greater democratic control and oversight by the public – within local government procurement and spending decisions.

Figures from the Department for Communities and Local Government for 2011-12 show a combined annual budget of 122bn for English councils. Despite the claim from the Co-operative Bank that one third of councils currently employ its services, initial research by Move Your Money UK illustrates many council clients only use the Co-op for a small proportion of their total banking services. This indicates that tens, if not hundreds, of billions of pounds of public money in local authority budgets still resides within the big four banks.

In the US, the Move Your Money project is achieving considerable success in divesting city banking funds to socially responsible lenders. The nation’s two largest cities, Los Angeles and New York City, have passed responsible banking ordinances to collect better data on banks’ community reinvestment activities and to encourage institutions that want to do business within the cities to be more accountable to local concerns.

Other localities are following suit: Seattle city council member Nick Licata has declared that due to growing disparity in this country’s wealth, we can at the very least review the city’s banking and investment practices to ensure that public funds are invested in responsible financial institutions that support our community.

In May 2012, the city of Buffalo, New York announced that it would move its entire pot of city funds – some $45m (28m) – to the local First Niagra Bank. Buffalo became the seventh New York municipality to divest from JP Morgan Chase in protest against the bank’s foreclosure policies, which directly impact the lives of local home owners and small businesses.

This movement in the USA to extract local benefits from city financial arrangements stands in stark contrast to the UK, where the market dominance of the big four banks reinforces the much criticised culture of complacency and entitlement. Negotiating contracts and extracting local benefits is nigh on impossible.

Some local authorities, however, are already re-considering their banking options. In discussion of his council’s 2.4bn contract with NatWest, Lambeth councillor Paul McGlone, who sits on the finance scrutiny sub committee observed, it’s hard to pinpoint any tangible benefit the council receives, despite the size and value of its contract with RBS.

Hackney council has progressively migrated bank account services away from the larger banks, and now banks exclusively with the Co-operative Bank. Principal banking officer Chris Locke explained: The Co-operative understand the public sector. Other banks — specialists in the private sector – understand that organisations must compete with one another. They don’t really understand that organisations can collaborate, share their research development and save a lot of money by working co-operatively.

UK banks have been allowed to grow so large that they take their customers for granted, and no longer act in a socially responsible way, nor in local communities’ interest. With financial donations to political parties from the banks at record levels, there is little appetite for root and branch reform within Westminster.

But local government can seek to reverse this trend, encouraging a return to ethical, local investment by socially responsible financial institutions which have a stake in the local community and actively invest in its future. Councils can take the lead by stimulating investment in local credit unions, co-operative and ethical banks, growing the alternative financial sector and improving access to low cost credit for the financially excluded (in turn reducing demand for predatory pay day lenders).

We will soon carry out research with the aim of creating an ethical finance toolkit for local authorities. We hope this will help guide councils seeking to move funds into ethical, local and mutual banks.

Joel Benjamin is a campaigner for Move Your Money UK . Local authorities interested in the campaign can email joel@moveyourmoney.org.uk for more information or to offer support

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