Gove is becoming a liability for the Tories

The Education Secretary's running battles with teachers and "the blob" do not endear him to voters.

For the third day running, the fallout from Michael Gove's decision to remove Labour peer and former Blair adviser Sally Morgan as the chair of Ofsted is leading the headlines. The Lib Dems are warning that they will veto any attempt by him to appoint Tory donor Theodore Agnew as her successor, Labour has written to Jeremy Heywood demanding an investigation, and former Ofsted chief inspector David Bell has warned Gove not to "believe his own hype" in a written rebuke

Few voters will trouble themselves with the details (how many know or care who leads Ofsted?) but the repeated criticisms of Gove from all sides will encourage the suspicion that the education system is being changed in undesirable ways - and that should trouble the Tories. While the Education Secretary is lauded by the commentariat and by Conservative activists, his approval rating among parents is less impressive. A YouGov poll last year found that 25 per cent of voters would be less likely to vote Tory if he became leader with just four per cent more likely.

And voters, contrary to Westminster perception, aren't keen on his policies either. Another YouGov poll, for the Times, showed that just 27 per cent support free schools with 47 per cent opposed. In addition, 66 cent share Labour and the Lib Dems' belief that the schools should only be able to employ qualified teachers and 56 per cent believe the national curriculum should be compulsory. For these reasons, among others, Labour has consistently led the Tories (see p. 8) on education since the end of 2010, with a five point advantage at present. 

Worse, just 12 per cent of teachers (at far from insignificant voting group) would vote Conservative, compared to 43 per cent for Labour and 6 per cent for the Lib Dems. Evidence of why was supplied elsewhere in the poll, which found that 79  per cent believe that the government's impact on the education system has been negative, and that 82 per cent of teachers and 87 per cent of school leaders are opposed to the coalition's expansion of academies and free schools. In addition, 74 per cent said that their morale had declined since the election and 70 per cent of head teachers did not feel trusted by ministers to get on with their jobs. Finally, 91 per cent of teachers opposed publicly-funded schools being run for profit (a policy Gove has said he would consider introducing under a Conservative majority government) and 93 per cent believed academies and free schools should only employ teachers with Qualified Teacher Status.

Those who believe that the Tories derive a political dividend from Gove's clashes with "the blob" (the name he and his ideological allies use for the educational establishment after the 1958 horror film) forget that voters are far more likely to trust teachers than they are politicians. A poll by Ipsos MORI last year found that 86 per cent of voters trust teachers compared to just 18 per cent for politicians (but 41 per cent for trade union officials). 

As David Bell writes in his piece today, "Don’t believe your own hype. Whitehall has a habit of isolating ministers. The day-to-day grind of policy battles, firefighting and political ding-dong can start to cut you off from outside ideas and thinking. The row over Ofsted's shows the importance of retaining, and being seen to retain, independent voices near the top – not simply 'yes men'. The danger is that while The Blob is a useful political tool in the short-term, it simply might not be as deep-rooted as the education secretary believes."

Gove has an important message to deliver today on breaking down "the Berlin Wall" between state and private schools (the subject of this week's NS cover story by David and George Kynaston). But his permanent kulturkampf with teachers means that, on this issue and much else, he is danger of no drowning his own words out. 

Education Secretary Michael Gove speaks at the Conservative conference in Manchester last year. 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