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Laurie Penny: A divided society

The chasm in our society is no longer between left and right, but between rich and poor.

For all the talk of one-nation Conservatism, the shadow-play of social injustice begins as soon as you step on to the train to the Tory party conference. Flinging my huge rucksack between the nearest doors just as the Birmingham train is about to pull away, I find myself moving through the low-lit hush of the first-class carriages. Wobbling through the half-empty aisles, I spot two Conservative councillors and several well-known columnists from the Times, the Guardian and the Telegraph curled comfortably in the spacious armchairs, over newspapers and coffee -- but through two sets of sliding doors are the cheaper seats.

Back here, it's stressful and there's not enough space. Standard class on the 8.50 Virgin Trains service is crowded with shift workers, students heading back to college after weekends at home -- and protesters. People from all corners of the country have given up their weekends to attend the national anti-cuts, pro-welfare demonstration convened by the Right to Work campaign and many of them are squeezed into the narrow red pens of Virgin's stock, shut off from the elbow-room of first class by a surcharge that makes all the difference. I drift off into a disturbing dream that Richard Branson is now running the welfare state, and several lurching delays later the denizens of standard class stumble out into Birmingham New Street, rumpled and irritable as only the British public can be after two hours crammed into a rolling metaphor for the state of the nation.

By noon, I am huddled in a car park under a dirty formica sky with several thousand welfare recipients, public-sector workers, local kids and union reps, getting thoroughly and miserably rained on. The press has dismissed the protest as union-led and union-run, because we now live in a world where "trade-union member" is a term of insult, but most of those I meet walking to the march assembly point are unaffiliated citizens. Kathryn, a teacher, says that this is her first protest since the Stop The War march in 2003. "It's mine, too," says Margaret, a retired social worker, who is marching alongside a gang of teenagers from local comprehensive schools. "I don't normally get involved in things like this, but this time, with these cuts, I just felt like I had to say something." "We've got to say something," agrees Kathryn. "It's better than staying quiet."

Everything's entirely quiet in the foyer of the Jury's Inn hotel where politicians and lobbyists are sipping tea in between fringe events. "It's hard to see how any protest will make much of a difference," says one Conservative MP, who refuses to be named. "Everybody knows that we have to make cuts anyway, so nobody's going to take much notice." Other delegates at the bar have heard that there's some sort of ruckus going on in the street, but the retreat into Tory bunker mentality has already begun. Despite this being the first conference in power the Conservatives have held for 14 years, the mood is far from triumphant -- at the fringe events, ministers are already on the back foot, defending the coalition's planned cuts to welfare and public services as calmly as possible.

Back at the march, a crosspatch cross section of British society is voicing its soggy dissent: pensioners grumble about the vehemence of some of the speakers while eating scotch eggs from plastic bags, and dreadlocked students share flasks of tea and foil-wrapped sandwiches with middle-aged mothers pushing prams. There's a curious sense of timelessness to the event. Some of the union reps clearly think they're back in the 1980s, and a dour close-harmony folk band is telling us all about the Hard Times of Olde England, but as the march moves off, it is led by disabled people in wheelchairs and their carers, determined to "show that we're suffering, too". At back of the folk band, moreover, is a man who everyone is trying very hard to ignore, because he is brandishing and occasionally honking through a vuvuzela, an item that seems in 2010 to have finally replaced the pitchfork as the prop of choice for the global working class attempting to annoy and terrify the bourgeoisie.

Meanwhile, just feet away inside the secure zone, behind a wall of steel cordons and police dogs, about the same number of warm, dry conference delegates are, and I'm not making this up, watching some contemporary dance. Specifically, a trio of twee pseudo-ballerinas in floaty saris from something called the Arts Conference, enacting modern interpretations of North Indian traditional dances with very serious expressions. They have been hired to twirl very slowly around the main stage before Francis Maude comes on to explain the "big society", and as he hasn't got a lot to say, they've clearly been instructed to take their time. The audience clap, polite and bewildered. Outside in the rain, the people who actually have to live in the "big society" are already howling for reprieve.

You couldn't have asked for a starker, more cliched illustration of the difference between the political elites and the rest of us if you'd given a toddler a fistful of red and blue crayons and told it to draw a picture of a divided society. The lines being drawn are wobbly and childish, but they are lines of pain and anger, and like the etchings of a traumatised child, they deserve to be paid attention to. The chasm in our society is no longer between left and right. The chasm is between rich and poor, and it's growing, dividing those members of the elite, including the liberal elite, for whom the coming cuts are an abstract if regrettable concept, and the people whose jobs and homes and families are under threat.

Most of the latter have not been able to afford the £400 accreditation process for access to the Conservative conference centre, with its finger-food receptions and winsome catered round tables to discuss whether central government should pull an awkward or merely resolved expression while tearing the heart out of the welfare state and refusing to share the financial burden amongst the wealthy. As delegates and journalists at the Demos grill nibble profiteroles and ask Greg Clark MP why he won't be slightly more forthright about shrinking the state, they seem not to have realised how much they are already resented by a good deal of ordinary people. Either that, or they simply don't care.

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

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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