Balls hits out at Carney over bank bonuses

Shadow chancellor insists "there’s no prospect of an unhappy relationship" but says the Bank of England governor is wrong to oppose a cap on bank bonuses.

There was much resentment among Labour at how Mervyn King leant greater credibility to the coalition's austerity programme by publicly endorsing it after the election. So when Mark Carney told the Treasury select committee on Wednesday that he was opposed to a "crude bonus cap" (as supported by Labour) and warned that caps on banks' market share (the policy announced by Ed Miliband in his speech today) in the US failed to prevent, and may have even encouraged, the financial crisis, some in the party worried that history was repeating itself. 

Asked about this on The World At One, Ed Balls began by demonstrating his experience, revealing that he had known the Bank of England governor for "many years" (their paths will have crossed during Balls's time as Gordon Brown's chief adviser) and that he "spoke to him yesterday". He added: "I don’t think he’s suggesting that the thing that caused the subprime banking crisis, or the irresponsible lending to homeowners in southern America was too much competition and too much diversity in the US banking system. There was a massive regulatory failure in America, and in Britain too, and we need tougher regulation...we want more competition." 

When pressed on Carney's obvious scepticism of the idea of limiting banks' size, Balls emphasised again, "As I’ve said, I’ve known Mark Carney for a decade and there’s no prospect of an unhappy relationship." But he went on to note one unbridgeable difference between the pair: on bank bonuses. Balls said: "On the issue which he raised on Wednesday, of bank bonuses, and our view that pay and bonuses, where the bonuses are more than 100% higher than the salary, he disagreed with that. On that one, I’m going to disagree with the governor of the Bank of England. I don’t think that is the right approach for bankers’ pay. " This explicit criticism contrasted with the more emollient tone adopted by Chuka Umunna on Today this morning, when he said: "I think it’s not healthy for us to involve governors of the Bank of England in big political debates and I don’t want to drag him into that." 

While there is little political cost to Balls disagreeing with Carney on this issue, given the public's near universal hostility to bank bonuses, the Tories will hope that this is a hint of other differences to come. If the governor can help to encourage scepticism of Labour's plans for radical market reform, just as King did over fiscal stimulus, George Osborne will feel that he has earned every penny of his £874,000 salary.  

Ed Balls speaks at the Labour conference in Brighton last year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Why Labour's rise could threaten Nicola Sturgeon's independence dream

As the First Minister shelves plans for a second vote, does she join the list of politicians who bet on an anti-Brexit dividend that failed to materialise?

The nights are getting longer, and so are generations. The independence referendum sequel will happen after, not before the Brexit process is complete, Nicola Sturgeon announced yesterday.

It means that Scottish Remainers will not have the opportunity to seamlessly move from being part of a United Kingdom in the European Union to an independent Scotland in the European Union. Because of the ongoing drama surrounding Theresa May, we've lost sight of what a bad night the SNP had on 8 June. Not just because they lost 21 of the 56 seats they were defending, including that of their leader in Westminster, Angus Robertson, and their former leader, Alex Salmond. They also have no truly safe seats left – having gone from the average SNP MP sitting on a majority of more than 10,000 to an average of just 2,521.

As Sturgeon conceded in her statement, there is an element of referendum fatigue in Scotland, which contributed to the loss. Does she now join the list of politicians – Tim Farron being one, and Owen Smith the other – who bet on an anti-Brexit dividend that failed to materialise?

I'm not so sure. Of all the shocks on election night, what happened to the SNP was in many ways the least surprising and most long-advertised. We knew from the 2016 Holyrood elections – before the SNP had committed to a referendum by March 2019 – that No voters were getting better at voting tactically to defeat the SNP, which was helping all the Unionist parties outperform their vote share. We saw that in the local elections earlier this year, too. We knew, too, that the biggest beneficiaries of that shift were the Scottish Conservatives.

So in many ways, what happened at the election was part of a bigger trend that Sturgeon was betting on a wave of anger at the Brexit vote. If we get a bad Brexit deal, or worse, no deal at all, then it may turn out that Sturgeon's problem was simply that this election came a little too early.

The bigger problem for the Yes side isn't what happened to the SNP's MPs – they can undo that with a strong showing at the Holyrood elections in 2021 or at Westminster in 2022. The big problem is what happened to the Labour Party across the United Kingdom.

One of Better Together's big advantages in 2014 is that, regardless of whether you voted for the Conservatives, the Liberal Democrats or the Labour Party, if you believed the polls, you had a pretty reasonable expectation that your type of politics would be represented in the government of Britain sometime soon.

For the last two years, the polls, local elections and by-elections have all suggested that the only people in Scotland who could have that expectation were Conservatives. Bluntly: the day after the local elections, Labour and the Liberal Democrats looked to be decades from power, and the best way to get a centre-left government looked to be a Yes vote. The day after the general election, both parties could hope to be in government within six months.

As Tommy Sheppard, the SNP MP for Edinburgh East, observed in a smart column for the Herald after the election, one of the reasons why the SNP lost votes was that Corbyn's manifesto took some of the optimistic vote that they gobbled up in 2014 and 2015.

And while Brexit may yet sour enough to make Nicola Sturgeon's second referendum more appealing on that ground, the transformation in Labour's position over the course of the election campaign is a much bigger problem for the SNP.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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