Gove reforms are far from radical

Gove's White Paper promised real reform, but consists of reheated policy and headline grabbing gimmi

The long wait is over. Michael Gove's White Paper on reforming Britain's education has arrived, with its flagship policies dominating much of today's coverage.

Sadly, Gove's White Paper contains nothing new and nothing radical. It's a mixture of reheated policy announcements and headline grabbing gimmicks.

The more substantial (if not original) policies included the reclassification of schools as failing when 35 per cent of pupils fail to achieve five A*-C. "I don't think it's right that you can have a school where two-thirds of children aren't getting five basic GCSEs," said Gove, and he is right. When a school fails to get more than half of its pupils to a basic educational standard, it has failed.

There is a certain disjuncture, however, between Gove's rhetoric of freeing teachers from cloying targets and bureaucracy -- but then introducing even more stringent targets than before. Zoe Williams pointed out the self-defeating nature of this policy.

So a government appoints people who aren't teachers to set targets; those same people then attack schools for being too target-driven; and a new regime sets new targets to break the spell of the old targets.

All schools, including special schools, will be able to become academies. The jury is still very much out on whether academies are a success. This policy is bold, but offers no guarantees that schools will immediately improve if released from the control of local authorities.

Aside from these two major policies, most of the White Paper is simply tabloid-friendly tinkering.

For little discernible educational reason, former troops will be encouraged to take their PGCEs. While this gave the Daily Mail a hard on ("battle-hardened former troops will be recruited to... drive out 'trendy' learning methods encouraged under Labour"), turning troops from Taliban-trashers to teachers does not strike me as thorough, well thought-out policy; it strikes me as a gimmick.

The same applies to the English baccalaureate -- a new award to be given to pupils who get good GCSEs in English, maths, science, a modern or ancient foreign language, and a humanity. It is at best a fudge, designed to compensate for Britain's failing exam system.

In an editorial this morning, the Times chastised Gove for failing to deal with one of the major issues for education in England today: incompetent teachers and how to get rid of them.

Bad teachers should not be allowed to cling on to their jobs, dragging down attainment. They are two sides of the same coin: removing bad teachers, by raising the prestige of teaching, will help to attract new, better ones...The exclusion rate for teachers is alarmingly low. The General Teaching Council for England (GTC), the body responsible for improving the quality of teaching, has failed to champion penalising failure. Three-quarters of complaints are dismissed with no further investigation, and only eight teachers were barred by the GTC between 2001 and 2008.

Gove promised much before coming to power. He was a forthright and effective critic of Ed Balls and Labour's education failures. In power, however, Gove has consistently failed to come up with the real, radical reform that is required in English schools. The White Paper won't make schools worse, but it won't make them much better.

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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