Alex Salmond, Scotland's First Minister, gives an interview following an addressing a Business for Scotland event on February 17, 2014 in Aberdeen. Photograph: Getty Images.
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Even if Scotland votes No, the status quo will not hold

Whatever the outcome in September, Scotland won't have to wait too long for even greater autonomy

A couple of weeks before the 2011 Scottish Parliament election, I wrote a leading article in the New Statesman warning Labour that they were facing a defeat that would have profound consequences for the party, Scotland and the United Kingdom. Labour leader Ed Miliband was baffled. He said to a colleague of mine (and I paraphrase): "Why is Jason warning us about Scotland?" He got his answer when Labour were deservedly routed and the SNP won a landslide victory.

For far too long, the Westminster establishment has been complacent about Scotland and the aspirations of the Scottish people. It’s as if they misunderstood or hadn’t bothered even seriously to think about why so many Scots were restless for change. Or why so many Scots felt alienated from the globalised quasi-city state that is London and from the Westminster jamboree. A politician such as the clownish UKIP leader Nigel Farage has huge influence in England, even though his party does not hold a single Westminster seat. His populist anti-immigrant, anti-European rhetoric is shaping Conservative and Labour party policy. In Scotland, UKIP are an irrelevance.

In the 1955 general election, the Conservative and Unionist Party won a majority of seats in Scotland. In 1997, in the last general election before the introduction of devolution, they won none out of 72 seats. A spectacular decline.The harshness and cruelty of the Thatcher years destroyed the Tories north of the Border. They dumped the poll tax on Scotland first and myopically opposed devolution. Today, PM David Cameron would rather lecture the Scots from the safety of an empty velodrome in east London than dare to speak in Edinburgh or debate directly with the First Minister. If he did, he knows he would be traduced and ridiculed.

Labour have big problems, too. They have lost the support in Scotland of many intellectuals, writers and artists who now favour independence, if not the SNP. These people matter because they create a culture and a climate of opinion. Meanwhile, among the poorest fifth of Scots, Alex Salmond has an extraordinary approval rating of +26. The battle for independence is increasingly dividing along class lines. For decades, Labour treated Scotland as if it was their personal fiefdom. The party became bloated and the talent pool more shallow as the most able Labour politicians – Donald Dewar, Robin Cook, John Smith, Gordon Brown, Alistair Darling, Douglas Alexander – all headed south.

At Westminster, Salmond is respected as a dangerous and formidable opponent but until very recently the standard line on Scottish independence was: "It won’t happen." But now there is a palpable sense of panic among English elites. London-based liberal media commentators are writing plaintive pleas for the Scots not to go. Even veteran rocker David Bowie has a view – from New York. There is growing anxiety, certainly among Labour supporters, that independence would result in an increasingly Eurosceptic, permanently Tory-dominated, rump-UK. Meanwhile, Scotland would be free to forge a new identity as a Nordic-style social democracy.

In a New Statesman essay last week, Salmond writes of how an independent Scotland could act as a progressive beacon for those in these islands who yearn for a fairer society. On Tuesday evening, he will, at our invitation, come south to give a lecture making the case for independence in the heart of Westminster. The English are belatedly waking up to the threat he poses to the unity of these islands. His long-held mission is to break up the British state. The British state is fighting back, hence George Osborne’s declaration –supported by Labour and the Liberal Democrats – that the UK would not enter into monetary union with an independent Scotland.

When I visited the FM at Bute House in Edinburgh last summer, he told me we were in the early stages of a "phoney war". "We are just clearing the ground," he said. Well, the ground has been cleared and battle begun in earnest. Whatever the outcome of the referendum, the status quo is unacceptable. I expect Salmond will lose narrowly in September but be able to claim a kind of victory. He must sense the UK is moving inexorably towards federalism. Even if it remains inside the Union, Scotland will not have to wait too long for even greater autonomy.

This piece originally appeared in the Sunday Mail

Jason Cowley is editor of the New Statesman. He has been the editor of Granta, a senior editor at the Observer and a staff writer at the Times.

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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