Barclays raises the stakes in banking reform

Bob Diamond warns that Barclays could leave the UK if it is unhappy with the coalition's banking ref

Bob Diamond, the man once described by Peter Mandelson as "the unacceptable face of banking", has warned that Barclays could leave the UK if it is unhappy with the coalition's eventual banking reforms. Sky News's business editor Mark Kleinman reveals that Diamond told the bank's shareholders that "It's no longer a question of whether Barclays wants to stay in the UK but whether the UK wants Barclays."

So, why the confrontational language? Well, there's just over a month to go until the Vickers Commission delivers its final report on banking, and the commission is likely to recommend that banks' high-risk investment arms should be ring-fenced from their retail operations. This reform, endorsed by George Osborne in his Mansion House speech, would (in theory) allow investment banks to fail without needing to be bailed out by the state.

At the time, it seemed as if Osborne had hit upon a neat compromise, one that was acceptable to both the banks and the Lib Dems. But it's no longer looking so simple. Vince Cable, for instance, used a recent speech to make it clear that he still favours a full Glass-Steagall-style separation, while the banks are increasingly anxious that any reform will make it harder for them to raise capital. Now, added to this combustive mix, is Diamond's threat to move Barclays' headquarters abroad.

Of course, Diamond's threat may be an empty one (and the government should call his bluff) but that won't stop it being taken seriously by the Treasury. Having declared that Britain is "open for business", Osborne will be desperate to avoid anything that suggests the reverse is true. The $64,000 question is whether he can do so, while simultaneously appeasing the Lib Dems. Cable, who has long believed that the banks require "fundamental surgery", has said that he will only accept a ring-fence on the condition that it can be "as effective as a full separation" and that it can be introduced at "a lower cost". Should Vickers fail to pass these tests, it's likely that the Business Secretary, emboldened by his victory over Rupert Murdoch, will consider all responses, up to and including his "nuclear option". Osborne will need all of his guile and cunning to identify a solution that all sides are prepared to tolerate.

George Eaton is political editor of the New Statesman.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.