Don't be fooled. This is still a banking crisis

And our elected politicians should call the bankers' bluff.

RBS chief executive Stephen Hester Source: Getty Images

Let's get one thing clear: this is not a crisis of, or for governments. This is first and foremost a banking crisis.

EU governments do not need a fragile, reckless and immensely wealthy private banking sector. However, as the financial markets made clear last week, the fragile private banking sector urgently needs Eurozone and in particular, taxpayer largesse.

For more than thirty years of financial de-regulation, western taxpayers have shored up and guaranteed the immense wealth and reckless lending of private bankers and their shareholders. Without their sacrifices, many private, global banks would have been liquidated during the financial crises of the 90s and through 2008. Thanks to public largesse, private bankers, their shareholders and bondholders survived. Some even thrived as weak western politicians failed to demand 'terms and conditions' for bailouts.

Now private banks are once again faced by liquidation - because of reckless and costly lending to poor and economically weak Eurozone governments and banks. If their losses are not socialised, they and their shareholders are doomed.

And so bankers are doing what highway robbers have done throughout time: holding a proverbial gun to the heads of Eurozone politicians and central bankers, and demanding they hand over cash.

Politicians should call their bluff.

Two weeks ago, EU leaders promised to set up a 440 billion-euro fund (the European Financial Stability Facility) that would, for example, help finance Greece's repayments for expensive loans made by UK, French and German banks. But politicians were fuzzy about numbers, because they had to consult EU parliaments. Bankers, facing insolvency, cannot wait for wider consultation.

"Bailouts need a bigger bucket" roared the banker's magazine Barrons. And, it appears, they need it now. The "bucket" is considered "wholly insufficient." Trillions more Euros are needed to shift the burden of losses from the private to the public sectors.

And just in case holidaying politicians failed to get the point, financial markets swung into action, and last Thursday piled on the blackmail.

That is not of course, how bankers see it, or tell it. On Friday, Stephen Hester, chief executive of RBS, told Radio 4's Today programme that "this is not a banking crisis." Instead he argued this is a crisis of "confidence in governments." Governments, he said, "need to give confidence to markets....that they will play their proper role in providing liquidity [my emphasis]. . . not to banks, but to governments, to enable funding to go normally...." He trailed off at this point, but I assume he had meant to add, "to enable funding to go normally to private bankers". Yes, those same bankers that had lent recklessly in the first place.

The fact is this: private bankers need a Eurozone bailout. Eurozone taxpayers do not need private bankers. It is possible, desirable even, to break loose from the chains of financial injustice and untie the cords that yoke the taxpayers of Europe to the interests of a financial elite

We know, because it has been done before.

The last time the world threw off the yoke of private wealth was in the 1930s. In September 1931, Britain's finance sector demanded high interest rates and austerity as the 1929 financial crisis hammered the very people innocent of its causes. At this point Britain, like Greece and Spain today, became defiant. The UK threw off its fetters and left the gold standard - the Euro of a century ago.

Under Keynes's tutelage, Sterling was revived as a money managed in the interests of the domestic economy by the Bank of England. It was protected from speculation and from the vested interests of the financial elite. After the war Britain embarked on one of the finest programme of public works expenditures known in modern history - and society thrived.

Interrupted by war, and diluted at Bretton Woods in 1947, finance was still restrained as servant, not master to the economy through the age of economic and social advance from 1945-1970.

If the Eurozone were to throw off the ties that subordinate it's prosperity to a small financial elite, it would feel the full force of the banking sector's anger through its friends in the media, academia and politics. But very soon, Europeans would come to understand that the alternative was very much better than subjugation to a small, arrogant and morally bankrupt elite.

Ann Pettifor is a director of PRIME, an economic think-tank, and a Fellow of the New Economics Foundation.

Photo: Getty
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Rising crime and fewer police show the most damaging impacts of austerity

We need to protect those who protect us.

Today’s revelation that police-recorded crime has risen by 10 per cent across England and Wales shows one of the most damaging impacts of austerity. Behind the cold figures are countless stories of personal misery; 723 homicides, 466,018 crimes with violence resulting in injury, and 205,869 domestic burglaries to take just a few examples.

It is crucial that politicians of all parties seek to address this rising level of violence and offer solutions to halt the increase in violent crime. I challenge any Tory to defend the idea that their constituents are best served by a continued squeeze on police budgets, when the number of officers is already at the lowest level for more than 30 years.

This week saw the launch Chris Bryant's Protect The Protectors Private Member’s Bill, which aims to secure greater protections for emergency service workers. It carries on where my attempts in the last parliament left off, and could not come at a more important time. Cuts to the number of police officers on our streets have not only left our communities less safe, but officers themselves are now more vulnerable as well.

As an MP I work closely with the local neighbourhood policing teams in my constituency of Halifax. There is some outstanding work going on to address the underlying causes of crime, to tackle antisocial behaviour, and to build trust and engagement across communities. I am always amazed that neighbourhood police officers seem to know the name of every kid in their patch. However cuts to West Yorkshire Police, which have totalled more than £160m since 2010, have meant that the number of neighbourhood officers in my district has been cut by half in the last year, as the budget squeeze continues and more resources are drawn into counter-terrorism and other specialisms .

Overall, West Yorkshire Police have seen a loss of around 1,200 officers. West Yorkshire Police Federation chairman Nick Smart is clear about the result: "To say it’s had no effect on frontline policing is just a nonsense.” Yet for years the Conservatives have argued just this, with the Prime Minister recently telling MPs that crime was at a record low, and ministers frequently arguing that the changing nature of crime means that the number of officers is a poor measure of police effectiveness. These figures today completely debunk that myth.

Constituents are also increasingly coming to me with concerns that crimes are not investigated once they are reported. Where the police simply do not have the resources to follow-up and attend or investigate crimes, communities lose faith and the criminals grow in confidence.

A frequently overlooked part of this discussion is that the demands on police have increased hugely, often in some unexpected ways. A clear example of this is that cuts in our mental health services have resulted in police officers having to deal with mental health issues in the custody suite. While on shift with the police last year, I saw how an average night included a series of people detained under the Mental Health Act. Due to a lack of specialist beds, vulnerable patients were held in a police cell, or even in the back of a police car, for their own safety. We should all be concerned that the police are becoming a catch-all for the state’s failures.

While the politically charged campaign to restore police numbers is ongoing, Protect The Protectors is seeking to build cross-party support for measures that would offer greater protections to officers immediately. In February, the Police Federation of England and Wales released the results of its latest welfare survey data which suggest that there were more than two million unarmed physical assaults on officers over a 12-month period, and a further 302,842 assaults using a deadly weapon.

This is partly due to an increase in single crewing, which sees officers sent out on their own into often hostile circumstances. Morale in the police has suffered hugely in recent years and almost every front-line officer will be able to recall a time when they were recently assaulted.

If we want to tackle this undeniable rise in violent crime, then a large part of the solution is protecting those who protect us; strengthening the law to keep them from harm where possible, restoring morale by removing the pay cap, and most importantly, increasing their numbers.

Holly Lynch is the MP for Halifax. The Protect the Protectors bill will get its second reading on the Friday 20th October. 

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