Strategy: Joe Garner says Nationwide still owns many of its branches
Not many chief executives would openly say they are proud to be one of the UK’s biggest taxpayers. Most are intent on minimising the amount they hand over to the Revenue to keep their shareholders happy.
It’s different for Joe Garner, chief executive of Nationwide Building Society. As the head of a mutual – owned by its members and run purely for their benefit – he sees paying hundreds of millions of pounds in tax as a badge of honour, particularly at a time when the Chancellor needs to replenish the coffers after paying out billions of pounds to help the country through the pandemic and now the cost-of-living crisis. The building society came tenth out of 40 lenders for total tax contributions for the financial year to April 2021.
‘I think it would be a surprise to many people to hear Nationwide is a top-ten taxpayer in the UK, but in my opinion it is a good thing,’ he says. ‘We pay our taxes with pride because it’s another way we contribute to the communities we serve.
‘I am much more proud to say we are a top taxpayer than I would be if we were one of those organisations that had found cunning ways, through subsidiaries far away, to avoid paying or to minimise their tax exposure,’ he adds, in a dig at the big banks, some of which have made prolific use of offshore havens for themselves and their customers.
Nationwide paid more than £650million in the year ended April 2022, including corporation tax, the banking surcharge, bank levy, employer’s National Insurance Contributions, irrecoverable VAT and business rates. He doesn’t quibble at paying an 8 per cent tax surcharge, levied on all the lenders in retribution for the credit crisis, even though Nationwide was not especially culpable compared with the likes of RBS or Lloyds, both of which took huge taxpayer bailouts.
Garner, 52, is speaking on the eve of his departure from Britain’s biggest building society after six years at the helm.
He has been a staunch champion of mutuality, at a time when the concept has been under threat.
There has never been the faintest suggestion that Garner would attempt to sell out the society to line his own pockets like the bosses of LV, Britain’s second-largest mutual insurer, who tried to flog the firm to private equity.
His successor, Debbie Crosbie, will be the mutual’s first female chief executive when she starts her new job later this week.
He is leaving on a high note, having doubled Nationwide’s profits to £1.6billion last year.
Soberingly, however, many customers – he prefers to call them members – are in for a tough time due to the cost-of-living crisis.
Garner expects house price growth, which remained strong throughout the pandemic, to slow in the months ahead. But he argues that Nationwide’s mutual status means it is well placed to help savers and borrowers weather the storm ahead, not least because, unlike his mainstream bank rivals, he is not intent on a wholesale programme of branch closures. The society has 625 outlets, making it the UK’s third-largest network.
‘From time to time, yes, we do close a branch,’ he says, ‘But we have shut 5 per cent of branches in an industry that has shut around 30 per cent. The key difference is that many of our competitors are trying to find ways to close branches, while we are trying to find ways of keeping them open.’
Post-pandemic, Nationwide has brought in flexible working, and branches may be closed one or two days a week. But, he says, staff are still helping people on the phone and through digital channels.
‘I listen to some competitors saying transactions in branches have fallen, but look at the nature of those transactions. Why do people come into a branch?’ he asks. ‘Often it is because they are dealing with difficult, sensitive issues, where face-to-face contact is more important, such as bereavement, power of attorney or financial difficulty.’
So have the banks that are shrinking their networks – including TSB, run until recently by Crosbie – been getting it wrong? ‘Debbie hasn’t started yet, but I do have a sense there is a deeply held belief in our society and our leadership in being there on the high street for members and communities,’ he says.
‘Our branches are typically smaller than banks. We didn’t get carried away, as many of our competitors did, on the sale and leaseback drug a few years ago, so we still own a high proportion, which means our rent bill is lower. ‘And typically we are not in super-prime locations, so the economics are different for us.’ Some competitors, he says, ‘see branches as a cost, but we see them a place of real value’. Garner has come in for criticism over the size of his pay packet, though in fairness, in April 2020, he was the first boss of a major lender to volunteer for a big cut to show solidarity with staff and customers in the pandemic.
Last year, he took home about £1.2million, compared with just under £2.4million in 2019 before Covid – large sums, but a lot less than the big bank bosses.
Garner is very worried about inflation, which he says is ‘frankly bad for everyone’.
‘It erodes the value of savings and hits affordability,’ he says, adding on a more optimistic note: ‘But isn’t it a good thing that there is a financially secure mutual with a singular purpose?
‘If the pressure intensifies, we are not going to feel the dilemma of whether we are serving shareholders or customers. We have only one job to do, which is to stand by members.
‘I am concerned about inflation, I really am, both at a financial level and, let’s face it, the geopolitical environment. Who would have thought we would be seeing a war in Europe? At the same time, all wars end in a deal, eventually. None of us know how long it will be, but it will happen, and often the darkest hour is before the dawn.’
Nationwide has raised more than £1million for the British Red Cross Ukraine Crisis Appeal from members and staff, including a donation of £250,000 from the lender itself, as part of its charity programme.
It has also given £4million in the past year to local housing charities and projects.
Endurance: Joe Garner’s hobby is triathlon, where her represents Great Britain in his age group
As for mutual benefits, members are offered a range of advantageous rates on products, and are entered in a monthly £1million prize draw. Over the past year, the financial benefit passed back to them increased by 23 per cent to £325million, though Garner says he would like to have returned even more to members.
The latest results, he says, do not, reflect the cost-of-living crisis.
‘So far we haven’t seen an increase in arrears. What we have seen is, where people were already struggling, they are finding it even tougher,’ he adds.
Garner – who previously held senior roles at HSBC, Dixons, Procter & Gamble and BT Openreach – has not formally decided on his next move, but he has been approached by Downing Street to lead an inquiry into surging bank fraud.
But his biggest achievement, he says, is that under his command, Nationwide ‘stayed true to our values’, adding: ‘As chief executive, I have only been the temporary custodian of this mutual’s integrity.’