The Lib Dem leadership must stop deluding itself over secret courts

Every wing, arm and leg of the party is livid about this. Clegg can't shrug the defeat off.

Last week, as ever before spring conference, every interviewer asked Lib Dem activists the same question – 'what’s this year's row going to be about?' This time, the media gave us standard responses as well: Huhne, Rennard or "Plan V" for the economy.

And all week, to a general response of rolling eyes, activists told them the same answer: secret courts.
No one was interested. No one cared. 'Aren’t you more bothered that your president called you cockroaches and nutters?' was the standard response. No, not at all – actually that’s more of a badge of pride. We care about secret courts.
 
The clues were there. "The day the party fell out of love with the coalition", wrote Liberator magazine after so many of our MPs defied Lib Dem policy and trooped through the lobbies to support the Justice and Security Bill. "There is no getting away from the fact that there is a huge gap between what all but 7 MPs (and a few absentees) did last night and what most activists wanted them to do", wrote Lib Dem Voice. And 100-plus activists signed a letter to the press saying the bill was plain wrong (I was proud to be one of them). But largely, I suspect, because no one asked Nick about it on ‘Call Clegg’, both the media and the leadership thought it was a non-issue. Big mistake.
 
Nick appeared unprepared for questions on it in his Q&A on Saturday, his answers throwing numerous straw men up and being quickly battered down. In the least surprising turn of events of the weekend, it was announced that the #secretcourts debate had won the ballot to be the first emergency motion of the conference. Then the eminent human rights lawyer, Dinah Rose, announced she was quitting the party over secret courts. And finally, we saw one of the most respected and admired campaigners in the party, Jo Shaw, resign in the emergency debate in one of the best speeches made from the floor in a long time. It’s worth watching. Needless to say, the motion opposing secret courts was overwhelmingly carried. 

According to the prominent Lib Dem blogger Charlotte Henry, a source close to the leader expressed the view that the secret courts debacle didn’t really matter "because nobody in the real world cares". How wrong headed can they be?

Every wing, arm and leg of the party is livid about this. They won’t win another Eastleigh without the activists – and there’s now a move by activists to refuse to support any parliamentary candidate who wandered through the yes lobby the other week. That’s how seriously people take it.

The leadership are no doubt sitting at home, cursing Jo Shaw’s name and wondering why the grass roots aren’t busy repeating the mantra set down from now till 2015 rather than what we are saying – "no to secret courts".

It’s because we are liberals. And we are democrats. And Nick – we’re against this sort of thing.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

Deputy Prime Minister Nick Clegg makes his keynote speech at the Liberal Democrat spring conference on 10 March 2013 in Brighton. Photograph: Getty Images.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

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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