Questions for Grant Shapps on Question Time

The housing minister is forced to stand in at the last minute as Baroness Warsi is "indisposed".

Baroness Warsi has withdrawn from tonight's edition of Question Time. Rumours are currently flying as to whether this is as a result of Mehdi Hasan's interview with her in this week's NS (full version not yet online -- go and buy and issue of the magazine) , in which she controversially states that Tory losses in "at least three seats" at the last election were "based on electoral fraud... predominantly in the Asian community", or whether she in fact pulled out days before publication, as government spinners seem to be putting about at the moment.

She will be replaced on tonight's programme by Grant Shapps, Conservative MP for Welwyn Hatfield, Minister of State for Housing & Local Government, and Question Time novice. We can only imagine the commotion in his office right now as he tries to prepare to face Simon Hughes, Diane Abbott, David Starkey and Brian Cox at about four hours' notice.

Surely, he will be asked about Lady Warsi's absence, and in particular the identity of the three seats she names in the interview. But there are questions that need to be put to Shapps himself -- as housing minister, he is now responsible for ameliorating the ever-worsening crisis in the UK's housing sector.

The loss of council homes for life, the chronic shortage of affordable housing in every part of the UK, and his recent remarks on housing association salaries are all areas where Shapps should be grilled.

But perhaps most important to pin down is the effect of the planned council tax freeze on new houses, or the New Homes Bonus scheme, as it has been called. Toby Thomas over at Left Foot Forward reports that shadow housing minister John Healey, in his speech to the Labour Party conference today, has once again strongly criticised this particular policy, arguing that it will in fact result in an increase in council tax, a disincentive for local authorities to build new houses, and an overall effect that some local authorities will end up paying the housing bills of others out of existing budgets (the New Homes Bonus will come out of existing grants). Toby writes:

Healey's analysis finds that 103 councils will suffer a fund-cut of on average £2 million each, helping to pay for the 222 councils who will gain by £400,000. Bigger towns are likely to lose out most, with Birmingham needing 8,500 homes a year built to avoid losing its grant, while Blaby in Leicestershire needs just 70.

This effect could in turn be heightened should local authorities choose not to embrace their newly-devolved role as the lead agency for house-building in their area. In an interview I did last week with Sir Bob Kerslake, incoming permanent secretary at Communities and Local Government and currently chief executive of the Homes and Communities Agency, he expressed the hope that "forward-looking" local authorities will seize on these incentives, but acknowledged that this will create inequality across the UK. He said:

"You can work with local authorities and show them potential, and even trade off one benefit of housing with another benefit, but in teh end I thnk if they set their face against it then they have to realise that different places will end up in different situations... That is the reality of looking backward."

Perhaps Grant Shapps will be able to shed some light this evening on what people stuck in poor quality housing who happen to live in a backward looking local authority should do to improve their situation, when faced with the reality of the arbitrary inequality created by such "big society" devolution.

Caroline Crampton is assistant editor of the New Statesman. She writes a weekly podcast column.

Getty
Show Hide image

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