Lynton Crosby: the questions Cameron needs to answer

Five days after the government postponed the introduction of plain cigarette packaging, the Tories' campaign strategist remains the story.

When Lynton Crosby was named as the Conservatives' campaign strategist last November, former Tory donor and deputy chairman Lord Ashcroft wrote in a 'helpful' memo to the Australian: 

Finally, I know you understand as much as anyone that it’s never a good thing when the adviser is the story. That being the case, I’m sure you’ll get on with the job and stay out of the limelight. 

While Crosby certainly has got on with the job, to the benefit of the Tories' poll ratings, he has become the story. Five days after the government announced that it had postponed plans to introduce plain cigarette packaging, the questions over Crosby's influence on the decision keep coming. On last night's Newsnight, Jeremy Hunt said that Crosby, whose company's clients include tobacco manufacturer Philip Morris, had never lobbied him or David Cameron "on issues to do with public health" and that it was a "whole area he is not allowed to touch", adding: "It is quite right he shouldn't because his company has clients in that area." 

But unfortunately for the Tories, these reponses only invite further scrutiny. With the publication of the government's lobbying bill today, Ed Miliband and Labour have a chance to challenge Cameron on the subject at today's PMQs, the final session before the summer recess. Here are some questions they might want to ask. 

Did you ask to see a list of Crosby's clients before hiring him?

If, as Hunt suggests, Crosby's business interests could create a conflict of interest, it is reasonable to challenge Cameron on whether he asked to see a list of his clients before employing him last November. A government spokesman admitted at the weekend that Cameron had been "unaware" that his strategist worked for Philip Morris but refused to say whether the Prime Minister had seen a list of Crosby Textor clients. 

Have you ever discussed alcohol or tobacco policy with Crosby?

To date, Cameron has merely said that Crosby has never "lobbied" him, refusing to deny that the pair have discussed government policy on alcohol and tobacco. Here's how he responded to two questions from Labour MPs on the subject. 

Mr Kevin Barron (Rother Valley) (Lab): I wrote to the Prime Minister on 8 May and I have not yet received a reply. May I ask him now whether he has had any discussions with Lynton Crosby about the standard packaging of cigarettes or the minimum price of a unit of alcohol—yes or no?

The Prime Minister: I can tell you, Mr Speaker, that Lynton Crosby has never lobbied me on anything.

Hansard, 19 June 2013, column 891

John Cryer (Leyton and Wanstead) (Lab): Further to the question that the Prime Minister failed to answer last week, can he confirm that he has never had a conversation with Lynton Crosby about alcohol pricing or cigarettes? The question is not “Has he been lobbied?”, but “Has he had that conversation?”

The Prime Minister: As I said last week, I have never been lobbied by Lynton Crosby about anything.

Hansard, 26 June 2013, column 297

Did Crosby's advice to "get the barnacles off the boat" include plain cigarette packaging?

The line from Conservative chairman Grant Shapps is that "Crosby advises the Conservative Party on political strategy; he doesn't advise on policy" but as he well knows, the distinction is not always a clear one. While it's unlikely that Crosby was so careless as to lobby Cameron directly on tobacco policy, he is known to have advised him to "get the barnacles off the boat". By this, the hard-nosed Australian is said to mean dispensing with extraneous measures that distract the government from voters' core concerns: the economy, immigration, education and welfare reform. Were plain cigarette packaging and minimum alcohol pricing (both of which were dropped from the Queen's Speech) among those he had in mind?

Conservative MP Sarah Wollaston, a former GP who has campaigned for both measures, suggested last night that it was "simply untrue" to claim that Crosby had no influence on policy. 

Will Crosby be forced to disclose his clients on the forthcoming register of lobbyists?

Crosby Textor does not publicly disclose its clients, which are known to have included alcohol and tobacco companies, but will it be forced to do so under the new lobbyists' register established by today's legislation? Wollaston declared last night that "to retain any credibility on lobbying, Cameron must postpone statement on minimum pricing until we know whether CTF [Crosby Textor Fullbrook] has big alcohol clients". 

Lynton Crosby, who was recently appointed as the Conservatives' election campaign manager after running Boris Johnson's re-election campaign.

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