Boris Johnson made remarks about Israel on LBC this morning. Photo: Getty
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"Disproportionate, ugly and tragic": Boris Johnson on Gaza eclipses the PM

A government minister resigned this morning over Gaza. No 10, the Chancellor and the Mayor of London have all responded to this move, revealing an increasingly untenable situation for the PM.

The minister and Tory peer Sayeeda Warsi resigned from the government this morning in protest over its policy on Gaza. The responses are interesting:

No 10

This is Downing Street's official response to Warsi's resignation:

The Prime Minister regrets that Baroness Warsi has decided to stand down and is grateful for the excellent work that she has done both as a Minister and in Opposition.

Our policy has always been consistently clear – the situation in Gaza is intolerable and we’ve urged both sides to agree to an immediate and unconditional ceasefire.

It's notable but unsurprising that there is no change in the PM's line on Gaza, his reticence over condemning Israel wholesale is still clear.
 

The Chancellor

The Telegraph reports George Osborne's far stronger reaction to the former Foreign Office minister's move:

This is a disappointing and frankly unnecessary decision. The British government is working with others in the world to bring peace to Gaza and we now have a tentative ceasefire which we all hope will hold.

The Mayor of London

Boris Johnson called the news "very sad" and voiced a hope for her return to government "as soon as possible". Yet it's his reaction to the crisis in Gaza, on LBC this morning, that is telling in how it differs from David Cameron's stance:

I can’t for the life of me see how this can be a sensible strategy. I think it is disproportionate, I think it is ugly and it is tragic and I don’t think it will do Israel any good in the long run.


Cameron so far has avoided the word "disproportionate". With a dramatic government resignation and a popular Tory figure like Johnson, a self-proclaimed Zionist, strongly condemning Israel's actions, how long will the PM be able to hold (or hold back) his position?

UPDATE 5 August 12.56

Ed Miliband has added to the responses to Warsi's resignation, calling her statement "completely right":

The government's position is wrong and I think Sayeeda Warsi's statement is completely right about this.

Miliband also called for the PM to "think much more clearly" about his policy on Gaza and to "break his silence" on the subject of Israel's actions.

Anoosh Chakelian is senior writer at 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