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.

Getty
Show Hide image

This is no time for a coup against a successful Labour leader

Don't blame Jeremy Corbyn for the Labour Party's crisis.

"The people who are sovereign in our party are the members," said John McDonnell this morning. As the coup against Jeremy Corbyn gains pace, the Shadow Chancellor has been talking a lot of sense. "It is time for people to come together to work in the interest of the country," he told Peston on Sunday, while emphasising that people will quickly lose trust in politics altogether if this internal squabbling continues. 

The Tory party is in complete disarray. Just days ago, the first Tory leader in 23 years to win a majority for his party was forced to resign from Government after just over a year in charge. We have some form of caretaker Government. Those who led the Brexit campaign now have no idea what to do. 

It is disappointing that a handful of Labour parliamentarians have decided to join in with the disintegration of British politics.

The Labour Party had the opportunity to keep its head while all about it lost theirs. It could have positioned itself as a credible alternative to a broken Government and a Tory party in chaos. Instead we have been left with a pathetic attempt to overturn the democratic will of the membership. 

But this has been coming for some time. In my opinion it has very little to do with the ramifications of the referendum result. Jeremy Corbyn was asked to do two things throughout the campaign: first, get Labour voters to side with Remain, and second, get young people to do the same.

Nearly seven in ten Labour supporters backed Remain. Young voters supported Remain by a 4:1 margin. This is about much more than an allegedly half-hearted referendum performance.

The Parliamentary Labour Party has failed to come to terms with Jeremy Corbyn’s emphatic victory. In September of last year he was elected with 59.5 per cent of the vote, some 170,000 ahead of his closest rival. It is a fact worth repeating. If another Labour leadership election were to be called I would expect Jeremy Corbyn to win by a similar margin.

In the recent local elections Jeremy managed to increase Labour’s share of the national vote on the 2015 general election. They said he would lose every by-election. He has won them emphatically. Time and time again Jeremy has exceeded expectation while also having to deal with an embittered wing within his own party.

This is no time for a leadership coup. I am dumbfounded by the attempt to remove Jeremy. The only thing that will come out of this attempted coup is another leadership election that Jeremy will win. Those opposed to him will then find themselves back at square one. Such moves only hurt Labour’s electoral chances. Labour could be offering an ambitious plan to the country concerning our current relationship with Europe, if opponents of Jeremy Corbyn hadn't decided to drop a nuke on the party.

This is a crisis Jeremy should take no responsibility for. The "bitterites" will try and they will fail. Corbyn may face a crisis of confidence. But it's the handful of rebel Labour MPs that have forced the party into a crisis of existence.

Liam Young is a commentator for the IndependentNew Statesman, Mirror and others.