Horse meat: what happened, and what happens next?

International mafia conspiracy, deadly lasagnes, calls for more regulation - rounded up.

Back when we just thought some horse meat had crept (trotted?) into a few supermarket value burgers, it didn't seem to be something you had to take particularly seriously. What's wrong with eating horse, we cried. They do in Europe, and everyone knows their food is better - in fact, my colleague Charlotte Simmonds put together some delicious-sounding Italian recipes, in case any readers felt inspired to give it a go. At worse, it was felt to be a failure of the supermarket to keep people informed about what they were eating - if something says "beef burger" on the label, it's not really on to fill the packet with horse instead, is it? Jokes were made on Twitter, most of them awful, and the story gradually died away.

Now, though, it's back with a vengence. Aldi and Findus have both withdrawn ready meals from sale after it was alleged that its beef lasagne contained only horse meat. The environment secretary, Owen Paterson, is touring the television stations this morning, urging people not to panic but warning of "more bad news" when further test results are published on Friday. Many of the papers have looked into the story in some detail, and lots of different angles are emerging. Here's your handy guide to what's happened so far.

It's an international mafia conspiracy

Sources close to the Department for the Environment, Food and Rural Affairs and the Food Standards Agency (Defra) told the Observer that the whole horse meat furore was the result of fraud that had an "international dimension". Polish and Italian mafia gangs apparently run vast schemes where they substitute horse meat for beef during the food production process. Owen Paterson said: "I'm concerned that this is an international criminal conspiracy here and we've really got to get to the bottom of it." The Independent on Sunday has investigated the complicated pan-Europe supply chain arrangements that have lead to this situation - read their account here.

Could it make you ill?

The Mail reported that food inspectors are concerned that some of the meat that ended up in the "beef" lasanges could contain E.coli. One of the companies that supplied Findus with meat - French firm Spanghero - had previously been investigated for a similar scare.

Observer science editor Robin McKie writes that there's a potential risk from a drug called bute or phenylbutazone that is given to horses to "relieve pain and treat fevers". If still present in the meat, it can have side effects in humans, such as triggering "a serious blood disorder known as aplastic anaemia". According to the Sunday Telegraph, there is also a possibility that some of the horse meat came from Romania, "where a virus called equine infectious anaemia is endemic, and has led to a ban on live exports".

What are we doing about it?

For now, more tests. There are more results due on Friday, which is why Owen Paterson is talking a lot about "more bad news" this morning. After that, more tests, more regularly - the Food Standards Agency should be doing DNA testing every three months, Paterson has said. The BBC's Andy Moore has said that up til now, the food industry has "relied on a system of self-policing", a phrase that has rather loud echoes of the way we talked about banks after the 2008 crash. An Observer editorial calls for more independent regulation and more on-site testing - expect more discussion of this in the next few days.

Is this BSE all over again?

No. But British farmers are angry at any suggestion it could be. National Farmers' Union president, Peter Kendall has said: "Our members are rightly angry and concerned with the recent developments relating to contaminated processed meat products. The contamination took place post farm-gate which farmers have no control over." However, in one regard, it could be similar. As Judith Woods pointed out in the Telegraph,  both the BSE controversy and now this horse meat problem have affected consumers' trust that what they read on a packet is really what's going to be inside.

Have the papers gone horse gag-mad?

Surprisingly, and almost disappointingly, today's front pages feature very few horse jokes (perhaps indicating that this is now A Serious Story.) Only two splashed on it. The Sunday Telegraph:

And the Independent on Sunday:

I, for one, was sad not to see the Racing Post take it on:


 

A Dartmoor pony. Don't worry, there's no suggestion any of those have ended up in a lasagne. Photograph: Getty Images

Caroline Crampton is assistant editor of the New Statesman. She writes a weekly podcast column.

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation