It's astonishing the banks haven't been ring-fenced earlier

The in-kind subsidy to consumer banks has been crying out for a limit.

The chancellor has announced his plan to "electrify" the proposed ring-fence between retail and investment arms of British banks — which George calls the "Jurassic Park solution" — ensuring that if a bank tries to breach the ring-fence, it will be separated fully.

Much of the criticism of the ring-fence, as well as the Chancellor's defence of it, stems from its effects on financial stability. That's obviously important, but there's a bigger reason why such a move is long over-due, and that's the state backing of retail banks.

This backing isn't even a question of the too big to fail subsidies which hand around £34bn to the biggest banks. Instead, it's the effect of the financial services compensation scheme.

That's the government body which protects up to £85,000 of individuals' deposits with accredited banks. Since it was formed, it has paid out over £26bn, mostly in the aftermath of the financial crisis, to customers of retail banks which went bust.

And that's good! The FSCS is necessary in a world in which customers can't be expected to judge the financial health of a bank when deciding where to keep their money, and even more necessary given that a bank account is largely deemed a prerequisite of living a normal life in the UK today (hence the concern over the lack of basic bank accounts). But, at least on a cursory analysis, the FSCS also reduces the cost of capital for banks, because they don't have to compensate customers for the risk that they will lose all their deposits.

For a bank that's not failing, though, the FSCS is an in-kind subsidy, and it makes sense to limit that distortion. That's the reason for a ring fence: it ensures that the government is only subsidising the consumer banking sector, rather than the entire sector at once.

The stability arguments are important; and the ring-fence does indeed lessen the downside of a casino bank going under (although the amount it will lead to broader stability of the financial system is more questionable). But even without them, there'd be a strong prima facie reason for some kind of limit to the amount consumer deposits can be leveraged.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why Barack Obama was right to release Chelsea Manning

A Presidential act of mercy is good for Manning, but also for the US.

In early 2010, a young US military intelligence analyst on an army base near Baghdad slipped a Lady Gaga CD into a computer and sang along to the music. In fact, the soldier's apparently upbeat mood hid two facts. 

First, the soldier later known as Chelsea Manning was completely alienated from army culture, and the callous way she believed it treated civilians in Iraq. And second, she was quietly erasing the music on her CDs and replacing it with files holding explosive military data, which she would release to the world via Wikileaks. 

To some, Manning is a free speech hero. To others, she is a traitor. President Barack Obama’s decision to commute her 35-year sentence before leaving office has been blasted as “outrageous” by leading Republican Paul Ryan. Other Republican critics argue Obama is rewarding an act that endangered the lives of soldiers and intelligence operatives while giving ammunition to Russia. 

They have a point. Liberals banging the drum against Russia’s leak offensive during the US election cannot simultaneously argue leaks are inherently good. 

But even if you think Manning was deeply misguided in her use of Lady Gaga CDs, there are strong reasons why we should celebrate her release. 

1. She was not judged on the public interest

Manning was motivated by what she believed to be human rights abuses in Iraq, but her public interest defence has never been tested. 

The leaks were undoubtedly of public interest. As Manning said in the podcast she recorded with Amnesty International: “When we made mistakes, planning operations, innocent people died.” 

Thanks to Manning’s leak, we also know about the Vatican hiding sex abuse scandals in Ireland, plus the UK promising to protect US interests during the Chilcot Inquiry. 

In countries such as Germany, Canada and Denmark, whistle blowers in sensitive areas can use a public interest defence. In the US, however, such a defence does not exist – meaning it is impossible for Manning to legally argue her actions were in the public good. 

2. She was deemed worse than rapists and murderers

Her sentence was out of proportion to her crime. Compare her 35-year sentence to that received by William Millay, a young police officer, also in 2013. Caught in the act of trying to sell classified documents to someone he believed was a Russian intelligence officer, he was given 16 years

According to Amnesty International: “Manning’s sentence was much longer than other members of the military convicted of charges such as murder, rape and war crimes, as well as any others who were convicted of leaking classified materials to the public.”

3. Her time in jail was particularly miserable 

Manning’s conditions in jail do nothing to dispel the idea she has been treated extraordinarily harshly. When initially placed in solitary confinement, she needed permission to do anything in her cell, even walking around to exercise. 

When she requested treatment for her gender dysphoria, the military prison’s initial response was a blanket refusal – despite the fact many civilian prisons accept the idea that trans inmates are entitled to hormones. Manning has attempted suicide several times. She finally received permission to receive gender transition surgery in 2016 after a hunger strike

4. Julian Assange can stop acting like a martyr

Internationally, Manning’s continued incarceration was likely to do more harm than good. She has said she is sorry “for hurting the US”. Her worldwide following has turned her into an icon of US hypocrisy on free speech.

Then there's the fact Wikileaks said its founder Julian Assange would agree to be extradited to the US if Manning was released. Now that Manning is months away from freedom, his excuses for staying in the Equadorian London Embassy to avoid Swedish rape allegations are somewhat feebler.  

As for the President - under whose watch Manning was prosecuted - he may be leaving his office with his legacy in peril, but with one stroke of his pen, he has changed a life. Manning, now 29, could have expected to leave prison in her late 50s. Instead, she'll be free before her 30th birthday. And perhaps the Equadorian ambassador will finally get his room back. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.