"There's a mood of 'anyone but Tom'. And people think: 'Hey, I'm anyone!'." Photo: Getty Images
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What's going on in the Labour deputy leadership race?

The parliamentary Labour party is desperate for someone to stop Tom Watson. That's one reason why it's unlikely to happen.

Note: on 12 September 2015, Tom Watson was elected deputy leader of the Labour party.

John Healey has pulled out of Labour’s deputy leadership race, urging his supporters to help those candidates who have yet to secure the 35 nominations they need to get on the ballot.

Although the Wentworth & Deane MP has a low profile outside Westminster, he is well-liked throughout the party and was widely expected to secure the backing of 35 MPs that he needed to get on the ballot. What’s going on?

It all comes down to the question that explains the race for the Labour party leadership: “will someone please stop Tom Watson?”

Although Watson is well-liked by members – “They see him as Mother Teresa,” sighs one MP – the parliamentary Labour party is less sold. “I’ve never been more opposed to any candidate in my life,” says one MP. Another senior MP says they will “chuck the whole thing in” if Watson becomes deputy leader. “He’s a bully and a liability,” says a third.

Although others disagree – “the movement always comes first for Tom,” says one left-wing MP – the antipathy extends into the party’s headquarters. One senior official says glumly: “Tom is going to come straight back in here and start running the show again, bullying the staff and throwing his weight around.” “He always wants to seize more power, and he can’t resist abusing his power,” says another.

But that opposition to Watson may only help him in the leadership contest. "The problem with the fact that the mood in the PLP is 'Anyone but Tom'," one MP observes, "is that a lot of people around here think 'Hey, I'm anyone!" That's why no fewer than four other candidates are desperately scrabbling for the nominations they need to make it on the ballot paper. (A fifth, Caroline Flint, has already secured the 35 nominations she needs to get on the ballot.)

"These candidates are all in the last chance saloon," one insider says, "Angela: elected in 1992. Ben: elected 1997. Stella: doesn't play well with others.”  Rushanara Ali, the MP for Bow & Bethnal Green, is said to fear that she is falling behind her peers having stood down from the frontbench in 2014 over the bombing of Isil in Iraq.

Healey was expected to do well, partly because he is respected across the party, and also because, in the words of one MP, there are plenty of people “from the same bit of the party as Tom who don’t want Tom”. But that doesn’t seem to have been enough for him to get 35 names. “He wasn’t organised,” says one MP bluntly. “He stepped down because he couldn’t get 35 MPs,” says another. The question is, who benefits now he’s gone?

Some of Healey’s supporters will doubtless swallow their reservations and back Watson. Others may decide they are willing to stomach their objections to Creasy as the non-Blairite candidate best placed to stop him personally. But the biggest beneficiary will probably be the most inoffensive candidate left standing, Angela Eagle, or the one remaining minority in the race, Rushanara Ali.

 

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Now listen to Stephen discussing the Labour leadership race on the NS podcast:

 

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

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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