Cable fires a warning shot at the bankers (and Osborne)

Business Secretary attacks the banks as "disingenuous in the extreme" for attempting to delay reform

Vince Cable built his reputation in opposition as the hammer of the bankers, so it's no surprise that he's taken exception to their recent behaviour. In an interview in this morning's Times (£), the Business Secretary criticises the "special pleading" of those banks attempting to use the eurozone crisis to delay structural reform. He declares: "It is disingenuous in the extreme to use the current context to argue against reform. Banks are in a way trying to create a panic around something which they know has got to happen".

While the likes of Angela Knight, the chief executive of the British Bankers' Association, argue that reform should be postponed until the economy has recovered, Cable takes a diametrically opposed position: recovery is impossible without reform. As he argues: "The fact that we continue three years after the 2008 crisis to still have anxieties about big financial institutions is all the more reason for grappling with this issue."

In other words, banks' retail and investment arms must be split, or at least ring-fenced, in order to ensure that institutions are no longer "too big to fail". As Mervyn King recently noted in an interview with the Daily Telegraph, it is the knowledge that the state will bail them out "on the downside" that allows banks to pay their staff such extravagant bonuses.

The context for Cable's intervention is the imminent publication (12 September) of the final Vickers report into banking. The Business Secretary is willing to accept the imposition of a ring-fence between banks' retail and investment divisions (the solution proposed by Vickers' interim report and endorsed by George Osborne in his Mansion House speech) but only on the condition that it can be "as effective as a full separation". But while the banks accept that some kind of structural reform is inevitable, they are prepared to do everything in their power to delay it. The fear among Lib Dems is that Osborne is prepared to appease them. As the FT reported earlier this month, the Chancellor is considering a plan to endorse ring-fencing but give banks until 2019 to implement the changes.

Should Osborne agree to an eight-year delay, he will find himself on a collision course with Cable. The Business Secretary accepts that any changes would require legislation and would not take place immediately. But it's safe to say that 2019 is not the date he has in mind. As Lord Oakeshott, Cable's representative on earth, told the Independent: "The banks are like car-makers who say they cannot afford proper brakes. There is no possible excuse for delay. Every day that goes by with no action on the Vickers report puts the British economy at more risk."

Cable's fear is that the banks view the postponement of reform as a prelude to its abandonment. But should the status quo survive, a repeat of the crash is not just possible but inevitable. The stakes could not be higher. For the sake of the economy, Cable must prevail.

George Eaton is political editor of the New Statesman.

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Who will win in Manchester Gorton?

Will Labour lose in Manchester Gorton?

The death of Gerald Kaufman will trigger a by-election in his Manchester Gorton seat, which has been Labour-held since 1935.

Coming so soon after the disappointing results in Copeland – where the seat was lost to the Tories – and Stoke – where the party lost vote share – some overly excitable commentators are talking up the possibility of an upset in the Manchester seat.

But Gorton is very different to Stoke-on-Trent and to Copeland. The Labour lead is 56 points, compared to 16.5 points in Stoke-on-Trent and 6.5 points in Copeland. (As I’ve written before and will doubtless write again, it’s much more instructive to talk about vote share rather than vote numbers in British elections. Most of the country tends to vote in the same way even if they vote at different volumes.)

That 47 per cent of the seat's residents come from a non-white background and that the Labour party holds every council seat in the constituency only adds to the party's strong position here. 

But that doesn’t mean that there is no interest to be had in the contest at all. That the seat voted heavily to remain in the European Union – around 65 per cent according to Chris Hanretty’s estimates – will provide a glimmer of hope to the Liberal Democrats that they can finish a strong second, as they did consistently from 1992 to 2010, before slumping to fifth in 2015.

How they do in second place will inform how jittery Labour MPs with smaller majorities and a history of Liberal Democrat activity are about Labour’s embrace of Brexit.

They also have a narrow chance of becoming competitive should Labour’s selection turn acrimonious. The seat has been in special measures since 2004, which means the selection will be run by the party’s national executive committee, though several local candidates are tipped to run, with Afzal Khan,  a local MEP, and Julie Reid, a local councillor, both expected to run for the vacant seats.

It’s highly unlikely but if the selection occurs in a way that irritates the local party or provokes serious local in-fighting, you can just about see how the Liberal Democrats give everyone a surprise. But it’s about as likely as the United States men landing on Mars any time soon – plausible, but far-fetched. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.