Founded in 1852 in the town of Halifax, the Halifax Permanent Building Society began as a mutual effort to provide affordable housing for working people. Over time, it grew into the world’s largest building society, embodying community values – until the rise of corporate interests reshaped its mission forever.
This article explores the transformation from community mutual to profit-driven corporation and its wider implications.
Origins of Building Societies
Originally, a building society was just that – a dozen or so tradesmen, artisans, shopkeepers or labourers coming together to pool resources and build each member a house, one house at a time. The order of building was generally determined by lots, and each member would continue to contribute until all members had a house. Then the building society would be dissolved.
Mutual Support and Community Spirit
In 1852, a group of men met in the back room of the Old Cock Inn in Halifax; in 1853 the Halifax Permanent Building Society was established. A permanent building society exists to pool the savings of its members and use those pooled funds to provide fair, affordable mortgages to its members, and to do that on a rolling or continuous basis – without external shareholders, without profit extraction, and with governance controlled democratically by the members themselves.
I spent an induction week in the Doncaster, St. Sepulchre Gate branch – bigger than most building societies at the time! – before taking up a role in the diamond shaped building in Halifax.
The Halifax Ethos: Cradle to Grave
The Halifax ethos was “cradle to grave”, and that applied to staff (colleagues) and to members (customers). We were all in it together, we were the world’s number one: we were the bloody Halifax! The culture was mutualist, with loyalty to staff and to members, and there was a real sense of community. If someone moved on, they were said to have “left the society”.
Growth, Expansion and Success
The business model was steady and sustainable, and the Halifax Building Society showed that there was room in the model for growth and expansion! The building society movement became an integral part of British culture – mutually beneficial support for communities.
Policy Shifts: Rise of Shareholder Capitalism
But something changed – in the 1980s and 1990s, the dominant political belief in Westminster and Whitehall was that private, shareholder-owned companies were more efficient and more competitive than mutuals. Mutuals were seen as:
- old-fashioned
- “cosy”
- insufficiently competitive
- slow to innovate
- too community-focused
Shareholder capitalism was the philosophy of the age, and demutualisation fitted the current ideological project perfectly.
Demutualisation: The End of an Era
The government and the regulators began to encourage demutualisation., and the prospect of windfall payments created strong support from members – greed over sustainability.
Halifax Staff could see that the Old Cock Inn legacy was drawing to a close and could feel the demutualisation project was doomed, but Andy Hornby pushed forward with the zest and ambition of a committed career banker.
The Halifax had coexisted with the people and, by definition, the government to achieve goals to the benefit of society, and the other building societies, though smaller, were no different. However, the promises of a bright new future turned out to be a bright new future for the few, as one by one, the lights of the thirty-odd demutualised building societies went out!
Changing Priorities in Business
The guys that met in the Old Cock Inn wanted to create something for the benefit of all, and they did, and it was successful, and it was sustainable; Andy Hornby and his contemporaries must therefore have been maintaining what could only be described as an alternative objective!
The people operating at the decision-making end of big business now appear to be obsessed with how they can extract more money from customers rather than with creating products and services that can improve life, society and the future.
Board meetings today are much more likely to cover directors bonusses, the merits of share buyback and how shifting financial focus might be applied to increase rates of return, rather than product innovation, meeting local needs and the interests of consumers and society.
Companies – just like the Halifax was forced to – have become the focus of financial speculation, where the skill of senior management has become the skill of the spreadsheet.
This is also evident in start-ups, where the rationales and mentalities are geared towards extracting cash rather than creating value – too many entrepreneurs view success as a function of being acquired by one of the tech giants.
The Consequences of Short-Termism
Creating products and services now looks very much like the secondary function of a business with investors looking for a quick return rather than something longer term and sustainable. There is nothing inherently wrong with making a profit, but rather than it being a measure of the success of a product or service, making profit has become a measure of a company’s ability to exploit, and making profit at all costs in the pursuit of shareholder value has effectively licenced greed in our boardrooms.
We have created an environment where public losses support private gains, and where infrastructure provided by the state is viewed as a free resource with little willingness to recognise its worth in the delivery of corporate value and even less of a desire to pay for it.
Short termism inevitably generates wealth inequality, a propensity to pollute, inclination towards low pay and a tax avoidance mindset.
Rediscovering Social Purpose in Enterprise
True enterprise must serve society before shareholders; delivering fair pay, safe work and sustainability aren’t costs, they are the core of a sustainable business.
Lessons from the Old Cock Inn
Our future is going to depend on social trust and shared prosperity, and that means local initiatives for local people, extending to national boundaries – revisiting the aspirations of the gentlemen in the back room at the Old Cock Inn.
