The Conservatives are facing an existential crisis

Deprived of their social and ideological anchor, the Tories may never win again.

The great British middle class has changed. Its characteristics, outlook, values and relationships with the rest of society are very different to how they were. Take just one measure: the educational background of people in middle class occupations.  In 1945, only 17,000 people graduated from university. Last year, there were 330,000 graduates

The sociology of this change is not yet fully understood, and the political consequences even less so. But we can already see the broad political ramifications of this development. For the Conservative Party, it’s clear that the old traditional true blue values simply don’t have traction any more. The Tories have lost their social and ideological anchor. Without an anchor, the Tories are adrift.  This explains the increasingly bad-tempered debate within the Conservative high command.

Francis Maude allowed his frustration to show for an instant when he said: "The Conservative party will always suffer if it is seen as trying to turn the clock back to an imagined golden era." Who else could he have been turning his fire on but Thatcherites such as Liam Fox and Norman Tebbit? Or what about Nick Boles MP, who said: "Only by showing we really are on the side of ordinary people will we turn the Conservative party back into a truly national party"? We can deduce from this that he clearly sees his party as one that is seen as representing only the elite.

But here is a riposte from a senior Tory activist writing in the Daily Telegraph: "The party needs to have courage to stand up for its traditional values. We should be unashamed about promoting our ideals and principles. Most voters want controlled immigration. Most oppose European integration. And most share our support for freedom under the law and free markets."

Now, we can choose to interpret these contending ideas and factions as a curiosity, a part of the detritus of every day politics and a reflection of the seething personal ambitions that poison so much of Westminster life. But to do so would be a mistake and would trivialise the issues at stake. For the Conservative Party faces an existential threat. These surface tensions reflect the underlying decay of the Tories’ traditional social base. The more perceptive among them understand the need to change. Michael Ashcroft put it succinctly when he said: "The need for new supporters is a mathematical fact." But in reality they are thrashing around for new meaning in a period of rapidly shifting demographics, which they can barely understand, let alone control.

All of this will make fascinating social and political history, but for Labour it is far more important than that. In order that Labour can win again, we need to understand the crises with which the Conservatives are struggling and to adapt our strategies accordingly. In retrospect, the 1992 election marked a turning point for the Conservatives. It was the last time they were able to construct a Commons majority based on attaining a vote of 14.1 million spread geographically across the country. Since then, they have never secured more than 10.6 million votes.

Ashcroft undertook research into his own party’s failure after the 2010 general election. From this polling, two categories of Conservative voters can be identified – the true blue Tories and the 2010 cohort. The true blue Tories are the Conservative party’s core group of supporters, who are generally aligned to rightwing issues, such as crime, immigration and taxation. They are also less likely to be socially liberal or to support issues such as gay marriage. Lord Ashcroft puts this group at about 8.2 million people. The 2010 cohort had rarely or never voted for the Conservative party before 2010, and tends to be more socially liberal and protective of public services. They number about 2.5 million voters. There is also a third group, those who considered voting Conservative but thought better of it for a variety of reasons. These are the “considerers” and they number nearly 2 million.

The Conservatives desperately need to appeal to all three groups to have even a chance of gaining a majority at the next election, but the tensions surrounding these three groups are nuanced and complex. A significant section of the true blue Tory base is showing signs of deep anxiety about the "liberal" aspects of the Cameron group’s politics, to the extent that significant numbers are now looking to Ukip; indeed, 35 per cent of Conservative party members could see themselves voting Ukip in the next general election.

At the same time, the 2010 cohort has almost entirely deserted the party, alienated by the government’s approach to a number of touchstone issues. The NHS shakeup, coupled with a deeply unpopular and unfair budget, led to overall support for the Conservatives descending to the levels of the 2005 and 2001 elections.

The Conservative considerers create further tension for the party. Their values tend to be more in line with those of the 2010 cohort, but they think the environment and improving schools are much more important issues than the 2010 cohort do. Recent polling proves that both the 2010 cohort and the considerers have abandoned the Conservative party in considerable numbers.

The truth is that the Tories face problems on both flanks.

Behind the scenes, it is clear that some Tory strategists have accepted that it will be very difficult to build an electoral majority with present trends. But they have hit on a cunning plan. They will seek to gerrymander British constitutional structures, for example by changing the boundaries and voter registration, in an attempt to prevent the Labour opposition from building its own majority while seeking to filch as many parliamentary seats back from the Liberal Democrats as possible.

However, the Conservative crisis does not mean that the Labour party is guaranteed an easy ride. There is much to be done in order for Labour to become the party of government at the next election The most often quoted law of politics in the democratic age is that elections are always won in the centre. Following the defeats that began in 1979, Labour lost its self-confidence and occasionally gave the impression that it had come to believe that, in order to win, we had to camp out on a kind of politics that was wholly centrist and even centre-right. The Labour party now has the space to put an end to this triangulation and to establish its own independent identity based on our abiding values of community, justice and equality.

The Tory base is showing signs of deep anxiety about the "liberal" aspects of Cameron's project. Photograph: Getty Images.

Jon Trickett is the shadow minister without portfolio, Labour deputy chair and MP for Hemsworth.

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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