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.

Getty
Show Hide image

What are the consequences of Brexit for the refugee crisis?

Politicians neglected the refugee crisis whilst campaigning – but they shouldn't now concede to the darker undertones of the debate.

In the chaotic aftermath of Brexit, the refugee crisis seems like a distant memory. Yet not even a year has passed since the body of a young Syrian boy washed up on a Turkish beach, shocking the world.

When campaigning for the EU referendum began, politicians neglected the crisis. Not because the situation had ameliorated, but because the issue had become strategically toxic. Nigel Farage's infamous poster aside, the Leave side preferred scare stories about economic migrants rather than refugees; the Remain side because the refugee crisis, more than anything else since its inception, highlighted the fragility of the ideals that underpin the European Union.

Many of the main issues aired in the course of the referendum debate were related to the refugee crisis, regardless of how little it impacted on them in reality; immigration, strain on public services, national identity. The refugee crisis became a proxy issue; implied, but not addressed, for fear of detrimental impact in the polls.

However, in his repugnant posters (it should be stressed, nothing to do with Leave campaign itself), Nigel Farage made explicit what he thought posed the greatest threat to the UK. Rightly, the posters have been condemned by both sides of the referendum debate, but the underlying suspicion of refugees it reflects has concerned many organisations.Their concern has only been exacerbated by the result of the referendum. The spike in hate crime compounds their fears.

Paul Dillane, head of UKLGIG, a charity that supports LGBTI asylum seekers to the UK, expressed unease at the reaction of his clients: “The asylum seekers I work with do not understand the decision that has been made – they feel vulnerable, they feel unwelcome. Yes the law hasn’t changed, and if they’re at risk of persecution, they will be protected. But they don’t feel like that now.”

Despite the troubling situation, the result of the referendum changes little when it comes to refugee law. “Refugee policy is shaped in London, not in Brussels”, said Stephen Hale, Chief Executive of Refugees Action. “The decision about how well we support refugees in terms of integration is a matter for the UK, not Brussels. The number of Syrian refugees we choose to resettle is a matter for the UK, not Brussels.”

Although the law may not have changed, from a diplomatic or political perspective, the same cannot be said. This does have the power to negatively impact legislation. Post-Brexit reaction in France surrounding the Touquet Treaty typifies this.

The Touquet Treaty, reached between the UK and France in 2003, permits each country to carry out passport checks on the other countries’ soil. It is what, according to French politicians in Calais, has accelerated the growth of the "Jungle", which currently accommodates close to 5,000 refugees.

Because the agreement was signed outside the auspices of the European Union, Brexit does not affect its legal legitimacy. However, for France, EU membership was crucial to the nature of the agreement. Speaking earlier this year, Harlem Desir, French Secretary of State for European Affairs, said the Touquet Treaty is “a bilaterial agreement. So, there will be no blackmail, nor threat, but it’s true that we cooperate more easily in both being members of the EU.”

Natacha Bouchart, mayor of Calais and a long-time critic of the treaty, has been vocal in her demands for legislative change since the result. Speaking to French broadcaster BGM TV, she said: “The British must take on the consequences of their choice. We are in a strong position to push, to press this request for a review and we are asking the President to bring his weight to the issue.” Some have adopted the slogan of the Leave campaign, telling them to now “take back control of your borders.”

Modification of the Touquet Treaty was branded part of ‘Project Fear’ by the Leave campaign. Because of this, change – if indeed it does happen – needs to be handled carefully by both the British and French governments.

The reaction of Natacha Bouchart is already a worrying sign for refugees. Firstly, it perpetuates the toxic narrative that casts refugees as an inconvenience. And secondly, any souring of relations between the UK and France over Brexit and the Touquet Treaty only increases the likelihood of refugees being used as political bargaining chips in the broader EU crisis over Schengen.

A divided government and disintegrating opposition do little to aid the situation. Furthermore, come October, how likely is a Brexit Tory cabinet – governing off the back of a manifesto predicated on reducing immigration – to extend the support networks offered to refugees? Even before the referendum, Theresa May, a supporter of the Remain campaign, said that Britain should withdraw from the European Convention on Human Rights, replacing it with the more questionable Bill of Rights.

Uncertainty of any kind is the most immediate danger to refugees. “Everyone is talking about it,” said Clare Mosesly, founder of Care4Calais. “But opinions on the impact are divided, which is creating yet more uncertainty.” Refugees, unsure whether Brexit will lead to increased fortification of the border, are prone to take ever more dangerous risks to reach the UK. Even economic uncertainty, seemingly distinct from issues such as the refugee crisis or immigration, has a negative impact. “The thing that worries me about a fragile economy”, said Paul Dillane, “is that when a country’s economy suffers, minorities suffer as well. Tolerance and inclusivity are undermined.”

The government must stress that the welcoming principles and legislation Britain had prior to Brexit remain in place. Andrej Mahecic, from the UNHCR, said “we will continue to rely on the UK’s strong support for humanitarian responses to refugee crises. Our work with the government on the UK’s asylum system and refugee resettlement schemes continues.”

The will from NGOs is there. The political will is less assured. In the aftermath of Brexit, the government must not concede to the darker side of the referendum debate.