A welcome U-turn from Osborne as he gets tougher on the banks

The Chancellor backs down and announces that regulators will have the power to break up banks that try to evade new rules.

It isn't often that we have cause to praise George Osborne here at The Staggers but today is one of those rare occasions. Having previously resisted calls from MPs for the government to toughen up its proposed banking reforms, the Chancellor has now decided that regulators will, after all, have the power to break up the banks if they try to evade new rules aimed at ensuring they are no longer too big to fail. The ring-fence separating their retail and investment arms will be "electrified" (one might call it the "Jurassic Park solution"). 

Osborne is giving a speech at 10:30am at JP Morgan's office in Bournemouth (yes, bankers do exist outside of London, is the message from his choice of venue) and will say: 

My message to the banks is clear: if a bank flouts the rules, the regulator and the Treasury will have the power to break it up altogether - full separation, not just ring fence.

He will add:

We’re not going to repeat the mistakes of the past. In America and elsewhere, banks found ways to get around the rules.

Greed overcame good governance. We could see that again – so we are going to arm ourselves in advance. We will electrify the ring fence

Proving that, like the Bourbon kings of France, they have learned nothing and forgotten nothing, the banks have hit back at Osborne, accusing him of creating "uncertainty for investors" (and more certainty for the rest of us?)

Anthony Browne, the head of the British Bankers' Association (formerly Boris Johnson's economic policy director and the director of Policy Exchange) 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."

Labour has responded more favourably to Osborne's move, describing it as a "partial climb down", but also raising two major concerns. First, that the new power to break up the banks will only apply to those that misbehave under the new criteria, rather than across the board. Second, that Osborne is planning to introduce a cap on leverage set at 33 times banks' capital, rather than the tougher 25-times limit proposed by the Vickers report.

Shadow Treasury minister Chris Leslie said: "If the reports are correct and the Chancellor is planning to stop short on both the backstop powers and legislation for the leverage ratio, then there will be a very real sense in the country that despite all the rhetoric the Chancellor hasn't got the appetite for the radical banking reform we need."

Having already conceded that his original position on ring-fencing was wrong, Osborne will need to address these criticisms in his speech if he's to have any credibility on this issue. 

George Osborne will say in a speech today that "if a bank flouts the rules, the regulator and the Treasury will have the power to break it up". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
Show Hide image

Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

0800 7318496