David Cameron speaks during a visit to Kingsmead School on February 2, 2015. Photograph: Getty Images.
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PMQs review: Cameron rides roughshod over Miliband again

The Tory leader's exuberant confidence allowed him to dominate the chamber. 

The Tories are purring with confidence at the moment. Their dominance of the media war and new-found unity means that they are scenting victory (even as the polls continue to show them neck-and-neck with Labour or slightly behind). 

The evidence of this was on display at today's PMQs. Ed Miliband asked David Cameron about preferential tax treatment for hedge funds (they are not required to pay stamp duty on their share transactions), linking the policy to the Tories' industry donors. But Cameron swatted his question away with effortless superiority. He questioned why "for 13 years, during many of which he was in the Treasury, they did absolutely nothing about this", before declaring, in reference to Ed Balls's Newsnight interview: "I have to say I'm delighted he's raised the economy on the morning after his shadow chancellor couldn't name one single business leader who backed Labour." 

At this point, the well-drilled Tory backbenches began chanting in unison: "Bill, Bill" and "Where's Bill?" (the first name of the business leader Balls almost remembered). Their barracking  persisted throughout Miliband's second question and they were rewarded with a first-rate Cameron gag: "Do you know what he said, Mr Speaker? He said: 'Bill Somebody.' Mr Speaker, Bill Somebody’s not a person; Bill somebody is Labour’s policy." Cheers erupted behind him. The Labour benches, meanwhile, already becalmed by the grim news from Scotland, were deathly silent. 

Miliband fought valiantly on, pressing Cameron to answer, but the PM had too much ammunition in reserve: the confusion over Labour's tuition fees policy, the tax avoidance of their donor John Mills, even the news that "the person who wrote that 'Things Can Only Get Better' says it no longer applies to Labour." The only moment of relief for Miliband came when he archly observed, as George Osborne sought to brief Cameron on tax policy: "You can't help him, George, you're too far away". 

But while the Labour leader was routed in the chamber, he can hope that Cameron's evasiveness hurts the PM in the country. His refusal to pledge to close the tax loophole (as Labour has done) risks reinforcing the Tories' reputation as the party of the rich (the greatest barrier to a majority). As they deride Labour's weaknesses, the Conservatives would do well not to forget their own. 

Outside of the main exchanges, a notable moment came when Labour MP and shadow justice minister Dan Jarvis questioned Cameron about support for a solar panel business in his Barnsley constituency. The respectful silence with which he was heard was a good example of why many believe he could one day lead his party. 

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