For a “fair” financial system, the banks must give something back

The leaders’ economy debate overlooked society’s most disadvantaged, and their relationship to the b

If this election has a buzzword, it is undoubtedly "fairness", which, along with "change", has been co-opted by all three main parties.

Last night's leaders' debate focused on the economy, covering banker's bonuses, regulatory reform and reducing the Budget deficit.

But what does this actually mean for most people? For all the vague talk of helping small businesses and protecting jobs, there was very little discussion of those now sitting at the bottom of the social and financial ladder, who continue to feel the fallout from a crisis they did little to create.

There are two main issues here. First is the plight of small businesses, many of which are struggling to obtain credit. Just a few months ago, it was reported that RBS, 84 per cent owned by the taxpayer, had failed to meet its target of increasing lending to businesses by £16bn.

The Better Banking campaign points out that some 25,000 businesses a year with viable propositions find it impossible to access credit. Small businesses in the UK have the highest rate of failure of all the OECD countries, largely because of undercapitalisation.

This is not "fair", and if economic growth is to be ensured, lending to small businesses must be a priority. The three main parties have all made nods towards this, but it remains to be seen whether they will go far enough.

Second is an issue that has largely been ignored across the board. David Cameron spoke last night about protecting the "frail" members of our society and Gordon Brown pledged to create jobs, while Nick Clegg argued for a tax system that is "fairer" to those on low incomes.

But what about the millions of people whose income is too low to pay any tax? Between five and seven million people have no access to credit because they don't have a bank account, or any credit history.

These people are disenfranchised, and at risk of falling into a cycle of debt. In January, the Financial Inclusion Centre said 100,000 families had borrowed £29m in total from illegal moneylenders over Christmas. The average amount borrowed was £288, but the average repayment was £820.

Even apart from such illegitimate loans, these families lose an extra £1,000 each year on average, through not being able to set up direct debits or flexible billing arrangements.

The 2010 Budget stated that banks would be legally obliged to provide a basic bank account to all UK citizens, to begin to redress the balance between banks and society's most disadvantaged members. It remains to be seen whether this will be upheld in the emergency Budget published after the election.

The Better Banking campaign is urging the party leaders to implement a series of measures: full disclosure on lending to small businesses, incentives and obligations for banks to take social responsibility, capping the amount that can be charged for credit, and reinvesting 1 per cent of banks' profit for public benefit.

Labour has adopted some of these promises in its manifesto, and the other parties must follow suit. The deep-seated sense of injustice felt by much of the electorate will not disappear, as disadvantaged people and local communities continue to suffer while banks return to profit. From this perspective, splitting banks up, or temporarily capping bonuses, all seem like distant, token measures.

As the banking crash painfully illustrated, the financial sector has roots running deep into every section of our society. The only way that long-term "fairness" can be ensured is if a more reciprocal relationship is created, in which the banks nurture the society that bailed them out.

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Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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The NS leader: Cold Britannia

Twenty years after the election of New Labour, for the left, it seems, things can only get worse. 

Twenty years after the election of New Labour, for the left, it seems, things can only get worse. The polls suggest a series of grim election defeats across Britain: Labour is 10 points behind the Conservatives even in Wales, putting Theresa May’s party on course to win a majority of seats there for the first time in a century. Meanwhile, in Scotland, the psephologist John Curtice expects the resurgent Tories, under the “centrist” leadership of Ruth Davidson, to gain seats while Labour struggles to cling on to its single MP.

Where did it all go wrong? In this week’s cover essay, beginning on page 26, John Harris traces the roots of Labour’s present troubles back to the scene of one of its greatest triumphs, on 1 May 1997, when it returned 418 MPs to the Commons and ended 18 years of Conservative rule. “Most pop-culture waves turn out to have been the advance party for a new mutation of capitalism, and so it proved with this one,” Mr Harris, one of the contributors to our New Times series, writes. “If Cool Britannia boiled down to anything, it was the birth of a London that by the early Noughties was becoming stupidly expensive and far too full of itself.”

Jump forward two decades and London is indeed now far too dominant in the British economy, sucking in a disproportionate number of graduates and immigrants and then expecting them to pay £4 for a milky coffee and £636,777 for an average house. Tackling the resentment caused by London’s dominance must be an urgent project for the Labour Party. It is one that Mr Corbyn and his key allies, John McDonnell, Emily Thornberry and Diane Abbott, are not well placed to do (all four are ultra-liberals who represent
London constituencies).

Labour must also find a happy relationship with patriotism, which lies beneath many of the other gripes made against Mr Corbyn: his discomfort with the institutions of the British state, his peacenik tendencies, his dislike of Nato and military alliances, his natural inclination towards transnational or foreign liberation movements, rather than seeking to evolve a popular national politics.

New Labour certainly knew how to wave the flag, even if the results made many on the left uncomfortable: on page 33, we republish our Leader from 2 May 1997, which complained about the “bulldog imagery” of Labour’s election campaign. Yet those heady weeks that followed Labour’s landslide victory were a time of optimism and renewal, when it was possible for people on the left to feel proud of their country and to celebrate its achievements, rather than just apologise for its mistakes. Today, Labour has become too reliant on misty invocations of the NHS to demonstrate that it likes or even understands the country it seeks to govern. A new patriotism, distinct from nationalism, is vital to any Labour revival.

That Tony Blair and his government have many detractors hardly needs to be said. The mistakes were grave: the catastrophic invasion of Iraq, a lax attitude to regulating the financial sector, a too-eager embrace of free-market globalisation, and the failure to impose transitional controls on immigration when eastern European states joined the EU. All contributed to the anger and disillusionment that led to the election as Labour leader of first the hapless Ed Miliband and then Jeremy Corbyn, a long-time rebel backbencher.

However, 20 years after the victory of the New Labour government, we should also acknowledge its successes, not least the minimum wage, education reform, Sure Start, a huge fall in pensioner poverty and investment in public services. Things did get better. They can do so again.

The far right halted

For once, the polls were correct. On 23 April, the centrist Emmanuel Macron triumphed in the first round of the French election with 24 per cent of the vote. The Front National’s Marine Le Pen came second with 21.3 per cent in an election in which the two main parties were routed. The two candidates will now face off on 7 May, and with the mainstream candidates of both left and right falling in behind Mr Macron, he will surely be France’s next president.

“There’s a clear distinction to be made between a political adversary and an enemy of the republic,” said Benoît Hamon, the candidate of the governing Parti Socialiste, who had strongly criticised Mr Macron during the campaign. “This is deadly serious now.” He is correct. Mr Macron may be a centrist rather than of the left but he is a democratic politician. Ms Le Pen is a borderline fascist and a victory for her would herald a dark future not just for France but for all of Europe. It is to Donald Trump’s deep shame that he appeared to endorse her on the eve of the vote.

This article first appeared in the 27 April 2017 issue of the New Statesman, Cool Britannia 20 Years On

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