How the Labour leadership result changes under a one-member-one-vote system

Had MPs' votes been treated in the same way as party members', Ed Miliband would have won a landslide victory.

One of the likely consequences of Ed Miliband's decision to introduce a new opt-in system for donations to Labour from affiliated trade union members will be a major change to the party's leadership election system. At present the decision lies with an electoral college split three ways between the party's 272 MPs and MEPs, all party members (193,000 at the last count) and members of affiliated trade unions and socialist societies (around 2.7 million). 

But should Miliband make all trade unionists who choose to donate full members of the party (as his speech on Tuesday implied), the third of these sections would effectively cease to exist (most socialist societies already require their members to be members of Labour). This would inevitably raise the question of whether the party should introduce a pure one-member-one-vote (OMOV) system, with MPs' votes no longer given greater weight than those of party members. As I noted in 2010, Labour is the only one of the three main parties which does not give the final say to individual party members. Under the electoral college system, the vote of one MP is worth the votes of 608 party members and 12,915 affiliated members and the vote of one party member is worth the votes of 21 affiliated members.

But would a one-member-one-vote system have changed the outcome in 2010? Earlier today, I reran the election using a OMOV model to discover the answer. It's not a perfect simulation; I don't have the data needed to strip out multiple votes (most MPs, for instance, had at least three votes by virtue of their membership of affiliated societies) and it's hard to know how many trade unionists would have participated under an opt-in system, but it's the best guide currently available. 

While the result does not change significantly (all the candidates finish in the same position, except Diane Abbott, who leapfrogs Andy Burnham and Ed Balls in the first round), it is notable that Ed Miliband's margin of victory increases dramatically from just 1.3 per cent to 8.8 per cent. Since David Miliband won the MPs' section by 140 votes to 122, his share is heavily reduced under a OMOV vote. He also won the party members' section by 66,814 to 55,992, but Ed's huge lead among affiliated members (119,405 to 80,266) means he pulls ahead. 

Given how often it's claimed that he wouldn't have won without the support of the "union barons" (the "block vote" was abolished by John Smith in 1993), Miliband's speech was, among other things, a subtle reminder that it was thousands of individual votes that delivered him victory. 

Here's the new result in full (you can view the actual result here). 

2010 Labour leadership election result under one-member-one-vote

Round One

1. Ed Miliband 125,649 (37.1%)

2. David Miliband 114,205 (33.8%)

3. Diane Abbott 35,259 (10.4%)

4. Ed Balls 34,489 (10.2%)

5. Andy Burnham 28,772 (8.5%)

Round Two

1. Ed Miliband 137,599 (41%)

2. David Miliband 118,575 (35.4%)

3. Ed Balls 40,992 (12.2%)

4. Andy Burnham 38,050 (11.4%)

(Since Abbott was eliminated in the first round in the actual contest, I have had to use Burnham's numbers.)

Round Three

1. Ed Miliband 149,675 (45.3%)

2. David Miliband 127,389 (38.5%)

3. Ed Balls 53,669 (16.2%)

Round Four

1. Ed Miliband 175,519 (54.4%)

2. David Miliband 147,220 (45.6%)

Ed Miliband's margin of victory increases from 1.3 per cent to 8.8 per cent under a one-member-one-vote system. 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