O come all ye faithful

Wind-turbines turn to face the wind. Sunflowers turn to face the sun. Will the British public turn o

I don’t know whether it was the stark lighting in the ballroom of the Winter Gardens at Blackpool or the giant backdrop of green trees and blue sky, but when George Osborne strode out onto the stage soon after mid-day, he looked perfectly plausible as a Chancellor-in-waiting. He seemed taller, a bit heavier, his voice fuller, more authoritative. What’s more, he had some real red meat for an audience desperate for some solid fare.

When he told the Conference he was going to exempt houses worth up to £1 million from inheritance tax, there was a sudden current of excitement in the hall. A well-dressed lady, possibly from Kensington and Chelsea, sitting near me groaned: “a million isn’t nearly enough!” She probably hoped, as others did, that Osborne would promise to abolish IHT altogether. But for most people Osborne’s pledge on death duty, coupled with a promise to remove stamp-duty for first-time buyers of houses costing less than £250,000, pressed all the right buttons.

Will the Osborne bounce and the anticipated Cameron bounce tomorrow be enough to counter the Brown bounce? Certainly, here in Blackpool, election fever is in the air. I had a drink with David Heathcoat Amory, long-serving MP for Wells. “Wells is ready” he told me. “The posters are printed!”

Heathcoat Amory believed that foot-and-mouth could throw a spanner in the works. “You can hardly hold an election with the country in lock-down mode.”

For the afternoon social policy debate, I found myself sitting next to Orlando Fraser. As the delegates gathered, he surprised me and others nearby by shouting “Cameron, Cameron!” and gesticulating vigorously. Orlando has never been backward about coming forward but it turned out on this occasion he was trying to attract the attention of a gentleman called Cameron Watts, a stalwart of Iain Duncan Smith’s Centre for Social Justice.

Orlando has been chairing one of the policy panels. Many of us hope that, after having fought a brilliant, though ultimately unsuccessful, fight to regain North Devon from the Liberal Democrats, Orlando will soon return to the fray. If Boris becomes Mayor of London on May 1 next year, perhaps Orlando could have a shot at Henley?

Talking of Boris, I have to admit to my shame that I missed his apparently well-received speech to the Conference. Multi-tasking, I was in Paris where Leo, one of Boris’ brothers, was celebrating his 40th birthday. But I caught up with my eldest son at a fringe meeting, where he was his usual exuberant self.

“I want a greener London” he proclaimed to a packed auditorium, “a London where more trees are being planted than cut down and I want us all to have the confidence to cycle!”

Sir Roger (Dr.)Bannister (who in his seventies probably still runs faster than most of us can cycle) recently pointed out to me that one of the advantages of cycling is that it restricts the flow of blood to the testicles, thus reducing fertility. Given the degree of “people-congestion” in London, this seems another excellent reason to promote the bicycle. I’m sorry I didn’t have a chance to mention this to Boris in Blackpool.

Blackpool itself is fairly bicycle-free. It has those famous trams, gliding along the promenade.Even trams have a carbon footprint, of course. Walking back to my hotel at the end of a long day, I ran into an old friend, Tony Juniper, director of Friends of the Earth. It was a wonderful balmy evening, with the sun setting splendidly over the Irish Sea. Tony nodded approvingly at the cluster of giant wind-turbines, rising out of the water on the horizon. “They turn to face the wind” Tony explained, “just as sunflowers turn to face the sun”.

Will the great British public, I wonder, turn their heads once again to the Conservative Party at the end of this Conference week? We must live in hope.

Stanley Johnson is an author, journalist and former Conservative member of the European Parliament. He has also worked in the European Commission. In 1984 Stanley was awarded the Greenpeace Prize for Outstanding Services to the Environment and in the same year the RSPCA Richard Martin award for services to animal welfare. In 1962 he won the Newdigate Prize for Poetry. He also happens to be the father of Boris Johnson.
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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation