Osborne's ring fence will be made of cheese wire

Power to break up the banks.

So Osborne is going to "reset the banking system". A difficult thing to do with trust between Westminster and the banks at an all time low. How is he going to do it?

Well, first there's going to be a ring-fence: but it's to be not so much electrified as made of cheese wire - if banks don't respect it, regulators will be able to break them up.

It's not just about the fence though - he also plans to make the banking sector more competitive by making it easier to switch bank accounts, and by introducing a new regulator who'll aim to help out new competitors who want to enter the game. There are also talks over how consumer power can be increased, to hold the banks in check.

There is a plus side for the banks: the leverage ratio won't be changed beyond 1:33, but as might be expected, they have not taken kindly to the news:

Anthony Browne, the head of the British Bankers' Association said:

This will create uncertainty for investors, making it more difficult for banks to raise capital which will ultimately mean that banks will have less money to lend to businesses.

"What banks and business need is regulatory certainty so that banks can get on with what they want to do, which is help the economy grow. This decision will damage London’s attractiveness as a global financial centre.

"Uncertainty" isn't really the issue though - banks have been under changing regulation since 2008. The main problem for the banks will now be flexibility, according to Credit Suisse analysts (via FT Alphaville):

Reducing options to transfer capital and funding – As we understand it, banks will be under tight scrutiny to implement strictly a ring-fence. This will clearly limit the flexibility for banks when setting-up their ring-fence plans and limit options to transfer capital and funding. Although this is hard to estimate at this stage, this could increase the overall costs of the reform for the industry. We currently do not have an impact in our estimates.

If ring-fence is to work, it needs to be enforced - but as banks make their money by finding their way around such restrictions, a truly impenetrable fence'll cost. Here is a summary of the estimated hits to the economy via FT Alphaville:

Estimates costs from implementation – The draft legislation published in October 2012 highlighted the following costs for the broader industry and economy: (i) on-going costs of £2-5bn per annum, which compares to our total profit £26.1bn for the five listed UK banks in 2014E; (ii) one-off transitional costs of £1.5-2.5bn; (iii) negative GDP impact of 0.04-0.1%; (iv) reduced tax receipts of £150-400mn (this assumes all bank costs are passed onto the consumer); and (v) a reduction in the value of the government’s shareholdings in RBS and Lloyds Banking Group in the range of £2bn to £5bn relative to a ‘do nothing’ baseline scenario (compares to current value of £45.1bn).

If banks don't respect the fence, regulators will be able to break them up. Photograph: Getty Images
Getty
Show Hide image

Jeremy Corbyn will stay on the Labour leadership ballot paper, judge rules

Labour donor Michael Foster had challenged the decision at the High Court.

The High Court has ruled that Jeremy Corbyn should be allowed to automatically run again for Labour leader after the decision of the party's National Executive Committee was challenged. 

Corbyn declared it a "waste of time" and an attempt to overturn the right of Labour members to choose their leader.

The decision ends the hope of some anti-Corbyn Labour members that he could be excluded from the contest altogether.

The legal challenge had been brought by Michael Foster, a Labour donor and former parliamentary candidate, who maintained he was simply seeking the views of experts.

But when the experts spoke, it was in Corbyn's favour. 

The ruling said: "Accordingly, the Judge accepted that the decision of the NEC was correct and that Mr Corbyn was entitled to be a candidate in the forthcoming election without the need for nominations."

This judgement was "wholly unaffected by political considerations", it added. 

Corbyn said: "I welcome the decision by the High Court to respect the democracy of the Labour Party.

"This has been a waste of time and resources when our party should be focused on holding the government to account.

"There should have been no question of the right of half a million Labour party members to choose their own leader being overturned. If anything, the aim should be to expand the number of voters in this election. I hope all candidates and supporters will reject any attempt to prolong this process, and that we can now proceed with the election in a comradely and respectful manner."

Iain McNicol, general secretary of the Labour Party, said: “We are delighted that the Court has upheld the authority and decision of the National Executive Committee of the Labour Party. 

“We will continue with the leadership election as agreed by the NEC."

If Corbyn had been excluded, he would have had to seek the nomination of 51 MPs, which would have been difficult since just 40 voted against the no confidence motion in him. He would therefore have been effectively excluded from running. 

Owen Smith, the candidate backed by rebel MPs, told the BBC earlier he believed Corbyn should stay on the ballot paper. 

He said after the judgement: “I’m pleased the court has done the right thing and ruled that Jeremy should be on the ballot. This now puts to bed any questions about the process, so we can get on with discussing the issues that really matter."

The news was greeted with celebration by Corbyn supporters.