The Tories might be winning the air war but they're losing the ground game

The story of the Conservatives’ shrivelled membership is potentially as significant as the story of Labour’s presentational shambles.

On the bright side – or is that sunny side up? – there won’t be any more complaints about Labour keeping too low a profile this summer. Ed Miliband’s picture will be in all of tomorrow’s papers. Unhelpfully for the opposition, it will be as the recipient of a dissenting egg. Or six. 

That will surely prolong the "Miliband’s summer of woe" story just when it might have been running out of momentum. The charge that Labour have mismanaged their recess is simultaneosuly true and unfair. As some of us pointed out early on, there was an awkward haitus after parliament rose in which the coalition parties carried on campaigning and the opposition appeared to stop.

That set the tone for the ensuing weeks, although Labour got more organised – effectively turning the conversation to the cost of living crisis for a few days – while the Tories and Lib Dems went quiet. The problem for Miliband was that a fallow patch and the suspicion that "the grid" of planned news interventions had been neglected aggravated an older and deeper anxiety about the lack of clarity in Labour’s offer to the electorate. It hasn’t been hard in recent months to find Labour people who will complain about the situation in private; the silly season lull meant those gripes were amplified in print. Before long there was a bad news feedback loop – people who need to write about politics and dread the period over summer in which there is nothing to write about, found that they could write about the politics of there being nothing happening and why it was bad for Labour (Look, here I am, at it again).

It is interesting to compare the treatment of Milband’s travails with another summer story rumbling on in the background about Conservative party membership. A number of prominent Tories connected to the ConservativeHome website have been trying to extract a definitive number from their party (£). CCHQ has refused, although in the process it has become clear that there are very probably fewer than 100,000 active card-carrying Tories.

It is a fairly arcane row and there is no reason why it should be reported with the same breathless vigour as Miliband’s malaise – but it is also a bona fide crisis for the Tory party. Since David Cameron became leader, membership has fallen by two thirds. (Numbers are falling across the board, with the exception of Ukip, but the drop is steepest among Conservatives.) So what? Perhaps, the days of mass membership of political organisations are over. Some form of looser association will be devised; innovation and modernisation might yet come to the rescue. That, at least, is the hope.

The problem for the Tories is that, even in the most optimistic analysis, the gap left by missing members won’t be plugged in time for a general election. As I wrote a few weeks ago, concern about a rusty machine with missing pieces in vital marginal seats is one the two issues that otherwise confident Tory MPs say could really scupper their chances of being the biggest party in the next parliament. (The other one is an outbreak of panic if Ukip win the highest share of any party in next year’s European parliament ballot.)

Labour, by contrast, are getting relatively organised on the ground. The Lib Dems are famously tenacious in the bastions where they are fortified around a local council and local MP. One senior Conservative recently told me he expects the next election to throw up a whole lot of constituency results that will look anomalous – cases of rogue swings, unexpected defeats or strange episodes of incumbent survival, which on closer inspection will turn out to be the result of especially effective local organisation.

There have always been a few such cases – Labour holding Birminghan Edgbaston in 2010 is one often cited example – but the Tory expectation is that there could be many more like it in 2015. The risk is made greater by losses in successive council elections over the course of a parliament. Each small defeat demoralises another member, his or her family, their friends. There is an aggregate effect that ends in fewer feet pounding the pavements and fewer hands stuffing envelopes when the big push comes.

In short, the story of the Tories’ shrivelled membership is potentially as significant as the story of Labour’s presentational shambles but, crucially, one is a London-based media topic and the other unfolds elsewhere, below the radar. In that sense, what the summer has confirmed is that Labour are losing the "air war" but are no less a force to be reckoned with on the ground.

Air supremacy matters, of course. Labour cannot afford the aura of mystery surrounding their basic offer to the country to continue. But the Tories should also be wary of celebrating what feels like a victory in the battle for control of the political landscape, when the quiet hills may conceal pockets of guerrilla tenacity sufficient to halt a Conservative advance.

David Cameron talks to staff during a visit to the Salford Royal Hospital accident and emergency department on August 8, 2013 in Salford. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former 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