Iraqi troops chant slogans against the Islamic State of Iraq and the Levant (ISIS) in Baghdad today. Photo: AFP
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UK failure to intervene in Syria has emboldened Iraqi insurgents, says Foreign Affairs Committee chair

Senior MP Sir Richard Ottaway speaks out on Iraq.

Sir Richard Ottaway, the Conservative chair of the parliamentary Foreign Affairs Committee, has said that Britain's failure to intervene in the Syrian civil war last year has emboldened the Sunni insurgents now storming Iraq.

Speaking to me earlier today, Sir Richard said: "I think we're seeing pigeons coming home to roost in Iraq. Not with reference to as far back as 2003 perhaps, but the vote in Parliament last August not to intervene in Syria has given confidence to the troublemakers in the region."

He added: "It has left a power vacuum, which doesn't ever remain open for long - people step into it. We're now seeing the geopolitical consequences of our vote last year. It was a mistake then, it's a mistake now."

The robust comments by the respected parliamentary committee chair stand in contrast to the response from the government, which has been criticised as weak.

The Prime Minister was censured for dining in a celebrity hotspot last night while the Iraqi crisis worsened, and the House of Commons was chastened following the failure of a single MP to raise the insurgency during Prime Minister's Questions yesterday noon.

Earlier today David Cameron spoke with Nato chief Anders Fogh Rasmussen about the crisis. Downing Street immediately stressed that the conversation did not relate to any possible Nato deployment of military resources, however, which has been ruled out.

Foreign Secretary William Hague has today urged Iraqi leaders from all communities to unite in responding to the "brutal aggression against their country". He also announced earlier: "We will continue to work urgently within the UN Security Council to help concert the wider international response".

In the US "all options" remain under consideration, including a military response to combat the rebels. Secretary of State John Kerry, who is in London for a conference on ending sexual violence in warzones, has indicated that President Barack Obama will make "timely decisions".

In the meantime the situation in Iraq continues to deteriorate, as the rebels sweep south towards Baghdad, having claimed two further towns in Diyala province. This afternoon Iraq's most senior cleric issued a call to arms against the Sunni insurgents, threatening worse violence.

While the West has been cautious in its response, Shia-majority Iran has lost no time offering support to its neighbour against the Sunni insurgency, the extension of which could threaten Iran's own the stability and security. Earlier today Iranian President Hassan Rouhani telephoned Iraqi Prime Minister Nouri al-Maliki to promise his nation’s support to the Shia-dominated Iraqi government.

When even the respected US journal Foreign Policy has called on readers to "step back from the breathless news for a second”, adding “it might be prudent to let the situation develop for a week or so”, developments on the ground in Iraq look in danger of overtaking the West.

Lucy Fisher writes about politics and is the winner of the Anthony Howard Award 2013. She tweets @LOS_Fisher.

 

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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