Banks tried to hide their bonuses, but now the game is up. What next?

Britain has always valued a sense of fair play. It is time to demand a fair banking system.

2011 was a year of constraint and contrition for the banking sector. Bonus pools were reduced, balance sheets slimmed down and high profile bankers heroically waived their bonuses.

Or so the banks' PR machines would have had us believe. Last Friday, as analysts trawled through Barclays and RBS's annual report and Lloyds' pay statement, a very different picture emerged from that painted by the banks.

Bob Diamond's pay packet for 2011 could be as much as £17.7 million. The head of state-backed RBS' investment banking division, John Hourican, was handed a package worth £7.4 million. And the Chief Executive of Lloyds netted £3.5 million. All in all Barclays, Lloyds and RBS paid out in excess of £90 million to top executives in 2011.

There is a clear injustice in a sector which is implicitly and explicitly subsidised by the taxpayer awarding itself bloated rewards at a time when the public are enduring austerity cuts, a squeeze on real incomes, and rising unemployment.

But the public outrage taps into something deeper. After all, the British sense of fair play has always been premised on there being haves and have-nots.

Public anger taps into the stark fact that the banking system is failing to fulfil some of its basic functions because the industry is grotesquely skewed towards socially unproductive activities that allow a small elite to extract vast wealth to the detriment of the many.

Despite a financial crisis, a £1.2 trillion bailout and ongoing public outcry, it can still seem like there is no viable alternative to business as usual. But it is worth reminding ourselves that this is not universal: the British banking system stands out from its US and European counterparts.

Firstly, the UK banking sector is one of the most concentrated in the world. In the retail sector six large national banks account for 92 per cent of personal current accounts, 85 per cent of mortgages, and 88 per cent of small business accounts .

Secondly, it is one of the least diverse in terms of the types and functions of financial providers. Whereas in the UK, the big four dominate the high street, in Germany a wide range of local and mutually owned banks have a 70 per cent share of the market for loans and deposits.

Thirdly, it is the largest in size relative to our economy. Assets of UK banks are almost six times GDP, compared to the US where they are roughly equal.

These features enabled the City to generate huge profits in the boom years, but they are also root causes of its inability to serve the needs of households and businesses.

The financial crisis exploded the myth that profits booked in the financial sector means wealth for the UK. Figures from the IMF show that despite the fact that, in relative terms, the UK banking sector is six times the size of its US equivalent, it generates the same amount of total tax revenue -- less than a paltry 2 per cent.

Now the long-term effects this British exceptionalism are clear for all to see. We have a banking system unable to allocate credit to viable businesses, provide bank accounts to low-income households, or even keep our money safe.

According to the New Economics Foundation, the UK lags other countries in achieving universal access to financial products and services, with 1.5m adults still lacking a current account. The branch network continues to shrink with a 44 per cent reduction since 1990 leaving more communities unbanked.

And Britain's small businesses struggle more than their European and American counterparts to access credit, with some 370,000 SMEs failing to secure loan finance from mainstream financial institutions in 2011 alone.

But what comes next?

Martin Kettle recently argued that the mood of the nation is to muddle along. The public just want to get back to normal with as little fuss as possible. Whilst it may be true that there is little appetite for a revolutionary overthrow of liberal capitalism, there is clear evidence that there is growing interest in a different way of doing things.

The alternative financial sector has flourished in the aftermath of the financial crisis -- filling the gaps where the big banks are simply unable to provide.

Households and businesses are becoming increasingly dependent on these alternatives. Unfortunately their rise is paralleled -- in fact dwarfed by the increase in doorstop and payday lenders which only goes to demonstrate the size of the unmet market demand.

These alternative institutions are still a tiny part of the financial ecosystem. But the sector is at a tipping point. It now needs to work together to create a narrative which takes it beyond a niche industry. It needs to the let the public know that there is alternative out there, and why its better for them.

That's why we have launched Move Your Money UK, a campaign encouraging people to move their money to ethical, local or mutual financial providers. There is appetite for change. We may not be in a revolutionary moment, but the public are no longer willing to accept business as usual from our banking sector and are looking for something better.

Louis Brooke is a co-founder of Move Your Money UK. Follow the campaign on Twitter @moveyourmoneyuk and Facebook.

Louis Brooke is a spokesperson for Move Your Money UK, a not for profit campaign group, promoting alternatives to the big banks. He is also communications manager for London Rebuilding Society, and co-founder and chairman of educational resource company now>press>play.

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Don't blame Jeremy Corbyn - polls show only Tory voters could have kept us in the EU

Despite deep divisions in the Labour Party, it's the Tory voters who let Remain down. 

The Labour Party was already having enough difficulty keeping itself together without a referendum on Britain’s membership of the European Union coming along. The party was reeling from the election of a leader who was not only well to the left of most of his parliamentary colleagues but also did not obviously have the personal skills needed to do the job. However, the referendum on the EU compounded the party’s difficulties by exposing another fissure - between its traditional white working class supporters and its public sector socially liberal middle class ones (including the vast bulk of its parliamentary party). In combination the two divisions threaten to tear the party part.

Elections in the UK are usually about the left and right of politics, whether the government should do a little more or a little less. On this Labour’s working and middle class supporters tend to be at one with each other. They all, albeit to varying degrees, want the state to do more, to curb the excesses of the capitalist market and produce more equitable outcomes. So long as political conflict focuses on this issue they are a viable electoral coalition.

However, the EU referendum was not about the size and the role of the British state. It was about what Britain’s relationship should be with an intergovernmental organisation that epitomises one of the major social and economic phenomena of our time, globalisation. This phenomenon has had significant economic and cultural consequences, including, not least, substantial flows of migrants in search of work in an internationalised labour market. 

Young graduates vs working class pensioners

Among young university graduates this development is regarded as an opportunity rather than a problem. It is the kind of world in which they have grown up. They have acquired the skills required to compete in the global market place. Indeed, they may well become migrants themselves, deploying their valued skills in Berlin or Barcelona. Meanwhile the experience of university, in which international students are often commonplace, has led them to embrace the cultural diversity that immigration brings.

This world looks very different to many an older white working class voter, who left school at the earliest possible opportunity. They are used to a world in which everyone speaks the same language and shares a common set of cultural values.  As a result, the relatively high levels of immigration that the UK has experienced in recent years is regarded as a threat. They want back the country in which they grew up and in which they once felt comfortable. Meanwhile, they suspect that the inflow of migrants helps explain why they have seen little if any increase in their living standards.

With questions of immigration and identity at its core, the referendum on Britain’s membership of the EU inevitably cut across Labour’s electoral coalition. Those with different educational experiences voted very differently. According to a large poll conducted on polling day by Lord Ashcroft, graduates and those still in education voted in favour of remaining in the EU by 59 per cent to 41 per cent, while those whose educational experience did not extend beyond secondary school voted by 65 per cent to 35 per cent to leave. Similarly, in their on the day exercise YouGov found that graduates voted in favour of Remain by 68 per cent to 32 per cent, while those whose highest qualification is a GCSE or its equivalent voted by 70 per cent to 30 per cent in favour of Leave. The party’s middle class supporters were in a very different place on this issue than their more working class ones.

White voters vs ethnic minorities

Just to compound Labour’s difficulties, there was a clear ethnic division in the referendum too. Those from an ethnic minority background, who have never shown much inclination to back UKIP, seemingly found the Leave side’s emphasis on reducing immigration relatively unattractive. Lord Ashcroft estimates that only 32 per cent of those from an ethnic minority background voted to Leave, compared with 53 per cent of those who regard themselves as ‘white’. Consequently, another part of Labour’s electoral coalition, Britain’s ethnic minority population, were also on the other side of the referendum divide from the party’s traditional white working class base.

Against this backdrop it was, in truth, hardly surprising that the highest level of support for Leave was in predominantly working class local authority areas in the North and Midlands of England where Labour tends to be relatively strong.  In the 2014 European Parliament election, Labour won on average 28 per cent of the vote in those local authority areas where less than 22 per cent have a degree, whereas the party won just 20 per cent in areas where more than 32 per cent are graduates. Now in the referendum, on average Leave won as much as 64 per cent of the vote in those places that fall into the former group, but as little as 42 per cent in the latter. A t the same time, no less than 71 of the 90 local authority areas in England and Wales with fewest graduates are in the North of England and the Midlands, whereas just 13 of the 83 areas with most graduates do so.

In short, the principal explanation for the fact that Leave did so well in the West Midlands (59 per cent), the East Midlands (59 per cent), the North East (58 per cent), and in Yorkshire & Humberside (58 per cent) in particular lies in the demography of Leave support and of those regions rather than in any particular failings on the part of the Labour party. Indeed, once we have taken the demographic character of an area into account, if anything Remain tended to do rather better the stronger Labour was locally. For example, amongst those council areas in England and Wales with relatively few graduates Leave won 62 per cent of the vote on average in places where Labour won over 25 per cent of the vote in 2014, compared with 67 per cent where Labour won less than 15 per cent.

Meanwhile, it was, of course, the other parts of its coalition, the socially liberal middle class and the country’s ethnic minority population, that ensured that London was the one part of England and Wales that did vote decisively in favour of remaining  (by 60 per cent to 40 per cent).  No less than 24 of the 33 council areas in the capital have a population in which over 32 per cent are graduates, while no less than 27 of the 41 most ethnically diverse parts of England and Wales are located in the capital. Again demography was crucial.

Corbyn not to blame

Against this backdrop it was hardly surprising that across Britain as a whole only around two-thirds (63 per cent according to Lord Ashcroft, 65 per cent as estimated by YouGov) of those who voted Labour in 2015 voted to remain in the EU. The party was never likely to achieve much more than this. And at least the party’s coalition did not fracture as badly as the one that backed David Cameron a year ago; well under half (42 per cent according to Lord Ashcroft, 39 per cent, YouGov) of those who voted Conservative in 2015 voted to remain. The real source of the Remain side’s difficulties was the failure of David Cameron to bring his own voters on board.

Yet it is Jeremy Corbyn who is taking the blame for the inside much of the Labour party for the Remain side’s failure, as the party’s pre-existing division about his leadership interacts with the division made manifest by the referendum. Of course, MPs are entitled to make their own judgement about Mr Corbyn’s capabilities for the job, a judgement that his performance in the referendum appears to have reinforced and which they may feel has become more pressing given that the outcome of the referendum makes an early general election more likely. But in truth there is little in the pattern of the results of the referendum to suggest that Mr Corbyn was personally responsible for Remain’s defeat. The referendum outcome looks more like a pretext for `an attempt to secure Mr Corbyn’s removal than a reason.

However, the referendum does raise questions for all wings of the Labour party, including above all its parliamentary party in which middle class graduates predominate. As we have argued before, unless the party can persuade the less well-off in Britain that social democracy can tame the tiger of globalised capitalism so that their interests and concerns – cultural as well as economic – can be met, it is at risk of losing their support. We have already in Scotland how the politics of identity can cause much of Labour’s working class support to melt away, and there is a risk that a similar politics could have the same effect in England should UKIP be able to sustain a post-referendum purpose and appeal. 

Certainly, there was little in the Remain side’s case – as espoused by Labour as well as the Conservatives – that met those concerns. There was, in truth, no answer on how to deal with immigration, while there was little attempt to explain how the UK’s membership of the EU could be used to advance the economic interests of the less well of. Instead the only reason offered for voting to remain was the allegedly deleterious consequences of leaving. Telling working class people that they have to put up with the consequences of globalisation is simply not good enough. Labour needs to take note – whoever leads it.
            
John Curtice is professor of politics at Strathclyde University and a columnist for IPPR’s journal Juncture