Labour recognises that it can't build a One Nation country alone

We understand that governments, on their own, cannot fix everything. Families and communities, businesses and trade unions, civic society, and elected leaders at every level must play their part.

Most of those gathered to hear Ed Miliband’s speech at the Labour Party conference in 2012 recognised that under his leadership the party had become an effective and united opposition. They also knew that fresh scandals over top pay, consumer rip-offs and banking sharp practices had vindicated his call for a more responsible capitalism, and that his analysis of the problems facing the squeezed middle and the need for deep reforms in the economy had struck a chord with millions of voters.

But it is only fair to say that some of those present last year in Manchester had doubts about how Ed could draw all this together into an overarching political project.

Those doubts were swiftly dispelled by an extraordinary speech, delivered without notes. Ed Miliband rose to the challenge, as he had done in the past. The theme of his speech, a closely guarded secret until he stood up, was a vision for rebuilding Britain as One Nation: "A country where everyone has a stake; a country where prosperity is fairly shared; where we have a shared destiny, a sense of shared endeavour and a common life that we lead together."

This was not just an audacious land-grab of a phrase once associated with a more compassionate era of Conservative government. Nor was he describing some impossible dream. Instead, the speech addressed, full on, the challenges facing Britain today. 

"Here is the genius of One Nation", he told the Conference:

"It doesn’t just tell us the country we can be. It tells us how we must rebuild. We won the war because we were One Nation. We built the peace because Labour governments and Conservative understood we needed to be One Nation. Every time Britain has faced its gravest challenge, we have only come through the storm because we were One Nation … To overcome the challenges we face, we must rediscover that spirit. That spirit the British people never forgot. That spirit of One Nation."

Since that speech, Ed Miliband and the shadow cabinet have been setting out what this means for our economy, our society, and our politics: a recovery made by and for the many, not the few; a society in which everyone has the opportunity, and the responsibility, to take part; and a party and a democracy that is open to everyone, not the preserve of closed circles or a narrow elite.

The building blocks of One Nation include not only new policies but also a radical process of party reform. Labour is renewing itself as a movement and helping to give a voice to people from every part of Britain and every walk of life. These changes will underpin the next Labour government, so that we can work with citizens, communities, businesses and civil society to meet together the challenges we face together.

Labour has already set out a series of radical new proposals that show how a One Nation government could begin rebuilding Britain, together with the people of our country: policies to get our banks working for our businesses, and our businesses fulfilling their responsibilities to their customers and employees; policies to ensure our public services give young people a fair chance to play their part and our elderly population the dignity and care they deserve; policies for the redesign of our tax and social security system so that everyone pays their fair share and responsibility goes all the way from the bottom to the top; policies to reform and renew our politics so that we can begin to reverse the disaffection and hopelessness that discourages too many from taking part. And of course the Labour Party will have more to say about all this and more before the next election.

The One Nation book we have edited is not about policy, or a blueprint for political reform. Instead, it shows how our policy programme and our campaign for the chance to implement it in government are anchored in people’s everyday lives, experiences, aspirations and struggles. Our values are vividly present in so many of the personal stories and local histories that make up our country. The brilliant, resilient and resourceful people and communities of Britain are ready and eager to play their part in rebuilding our country as One Nation.

But there is also a humility in the vision of One Nation. We understand that governments, on their own, cannot fix everything. This humility, though born in opposition, will continue when we are in government. We know that Labour will not be able to deliver the change Britain needs unless we make it a common endeavour – unless we work with families and communities, businesses and trade unions, civic society and elected leaders at every level. The fundamental renewal of Labour’s values, organisation, and approach to politics and social change, is the most important and transformative part of Ed Miliband’s project.

This is an extract from the introduction to the new book One Nation: Power, Hope, Community

Rachel Reeves is shadow chief secretary to the Treasury and MP for Leeds West

Owen Smith is shadow Welsh secretary and MP for Pontypridd

Workmen fix a Labour Party Conference banner to a fence outside the conference centre on September 21, 2013 in Brighton. Photograph: Getty Images.

Rachel Reeves is shadow chief secretary to the Treasury and MP for Leeds West

Owen Smith is shadow Welsh secretary and MP for Pontypridd

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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