Cameron moves to exclude Farage from the TV debates

PM says that only "the parties that are going to form the government" should be included if the debates are repeated in 2015.

Conservative commentators have long argued that one of the reasons the Tories failed to win a majority at the last election was the inclusion of Nick Clegg, the "none of the above" candidate, in the TV debates. The Lib Dem surge forced the party to direct resources away from attacking Labour and helped deny them victory in key marginal constituencies (the Conservatives finished second in 38 of the 57 seats won by the Lib Dems). A ConservativeHome survey of 109 Tory candidates in 2010 found that 91 per cent agreed that "the election debates gave the Liberal Democrats by-election status, and disrupted an already disjointed Tory campaign".

In view of this, it's unsurprising that David Cameron is determined not to repeat this tactical error in the case of UKIP. If and when the TV debates happen (and it remains a big 'if'), Nigel Farage's party, which stands a chance of winning the European elections in 2014, will undoubtedly push for inclusion. A recent ComRes poll found that 54 per cent of people believe Farage (who put in a typically assured performance on last night's Question Time) "should be offered the opportunity to take part alongside the other main party leaders". But in an interview with the House magazine, Cameron makes it clear that he's not one of them. He tells Paul Waugh and Sam Macrory: "Obviously, we have to decide on this nearer the time, but the TV debates should be about, you know, the parties that are going to form the government, in my view."

As you might expect, Farage has responded by describing Cameron as "embarrassingly out of touch". He said: "If UKIP's share of the opinion polls were to continue as they are now, to exclude us from the debates when the Lib Dems were included last time would make British politics look as outdated as the closed shop and embarrassingly out of touch.

"If he wants to restrict it to those parties who are likely to form the next government, he'd better not be booking studio time himself with confidence."

But Cameron makes a reasonable point. Though casually described as the UK's "third largest party" after outpolling the Lib Dems in recent months, UKIP still have no MPs and will be lucky to improve on this performance at the next election. Yet it is still likely to prove harder to justify the exclusion of Farage than it was to justify the absence of Alex Salmond in 2010. In the case of the SNP, the three main  parties can at least argue that only those parties competing to form the next Westminster government should be included, but this argument doesn't apply to UKIP. If the party is polling at least five per cent in 2015 (the threshold normally required for representation under a proportional system) then the right-wing press will likely demand the inclusion of Farage.

Incidentally, one guest at Wednesday night's ConservativeHome new year reception told me that George Osborne (that night's guest speaker), who remains the Conservatives' chief election strategist, has, in effect, declared that the debates will take place "over my dead body". So, as I said, don't count on a repeat in 2015.

UK Independence Party leader Nigel Farage said David Cameron was "embarrassingly out of touch". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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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