The fracking war shows how the Tory party has been captured by a recession-proof old guard

This is more than just a spot of local difficulty for the Conservatives. It is an existential challenge.

It could be a fete on a village green: the tea stall with home-baked cakes, the children’s play area, mellow music wafting over the rolling West Sussex countryside. In a shady spot, a group yoga session is under way.
 
This is Upper-Middle England relaxing on a bright Sunday afternoon in August – but with a difference. The scene is framed by placards and police vans. The green is really a narrow verge on the B2036 just outside the village of Balcombe. The main attraction is a gate that was inconspicuous until the land behind it was identified as a potential site for “fracking” – extracting natural gas by breaking sediments of rock with water and chemicals. Now the gate is guarded by a line of police officers. One of them tells me the festive mood is a weekend thing. “The atmosphere changes when there’s machinery going in.”
 
The Balcombe protest is an odd hybrid. The villagers don’t want fracking on their doorstep. Their cause has been taken up by itinerant eco-warriors. Along the road, the tents and battered camper vans of full-time activists are punctuated by the Land Rovers and Audis of local Sussex day-trippers. By the guarded gate, a retired villager in mustardcoloured corduroy trousers and burgundy sweater is chatting to a woman in psychedelic tie-dye. “We have to stop it here,” he says. “Otherwise it will spread. There are lots of places on the list for fracking. They’re saying it will go all the way to Tunbridge Wells.”
 
Tory England liked fracking a lot more before the discovery that it could happen in sedate southern Shires. The point was made with accidentally satirical candour by David Howell, a Conservative peer and former minister, when he suggested that environmental disruption should be reserved for “desolate” northern provinces.
 
The gaffe had added pungency because Howell’s son-in-law is George Osborne, the government’s main cheerleader for fracking. The Chancellor is persuaded that there is a pent-up energy boom waiting to be released from beneath the British soil. As a lifelong Londoner, he also carries a strain of metropolitan impatience with rural protectionism. Osborne is desperate to show that Britain’s economy is on the move. He wants cranes on the horizon, diggers in the fields and the smellof fresh asphalt in the air. David Cameron has a more instinctive feel for the countryside Tories’ dread of concrete.
 
What both men know is that there aren’t enough seats in the stockbroker belt to deliver a Conservative majority and that the party needs to woo a new generation if it is not to slip into terminal decline. It has no more than 170,000 members and their average age is 68.
 
It is an old conundrum. Conservatism atrophies when it becomes just about conserving things or, worse, wishing things would return to a fantasy of the way they are supposed to have been. Sensible Tories know that their party’s future will only be secured with a credible invitation to young people who aren’t well-off to join the affluent classes. They also know that the economy no longer works as an engine to reward the efforts of people on modest incomes with growing levels of comfort and security. Wages are stagnant, prices are rising, housing is unaffordable, saving is impossible.
 
The holy grail of Tory policy is some replica of the 1980 “Right to Buy” council houses, a scheme credited in Conservative lore with turning swaths of working-class Labour voters into proudly propertied Thatcherites. There is a reverential nod to that legacy in “Help to Buy”, Osborne’s scheme to boost home ownership with government- backed mortgages.
 
It is a pitiful tribute – its main impact is likely to be inflating prices, putting a house even further beyond the reach of families on low incomes. The intention is that new houses will be developed to meet the demand stoked by cheaper credit. That only works if there is somewhere to build. Since the greatest need is in the south-east, that means pouring more concrete into Tory backyards.
 
MPs for leafy constituencies say they are mired in frenzied local battles over new developments. The government’s efforts to relax planning regulations earlier this year provoked backbench fury. With Ukip poised to mop up Tory discontent, No 10 is sensitive to the charge of spraying bricks and mortar indiscriminately across the party’s electoral heartland. Once fracking is added to the mix, Cameron and Osborne are easily depicted in a conspiracy against all that is green and pleasant in England.
 
This is more than just a spot of local difficulty for the Conservatives. It is an existential challenge. For all the veneration of Thatcher, the Tories are miles away from repeating the Iron Lady’s record of throwing open the doors of stuffy Conservatism to new recruits.
 
The party has been captured by those who already have everything they need and whose main demand from politics is to be left to enjoy it in peace. Privately, senior Tories concede that many of their most stalwart supporters have been relatively untroubled by the economic turbulence of recent years. To the retired officer in his Kentish conservatory or the Surrey banker commuting into the City, it hardly felt like there was a crisis at all – at least, until Osborne’s diggers appeared at the bottom of the garden.
 
Those who avoided the pain are also very receptive to premature declarations (mostly by comfortably housed, well-paid commentators) that the ordeal is over, that lefty bleating about cuts was overblown and that normal service has been resumed. What they mean is that, for the lucky few, normal service was never really interrupted.
 
Yet elsewhere in Britain millions of people are being priced out of the middle-class dream. If they see Cameron taking the side of the minority who dodged the recession, they will feel priced out of ever being Tory voters, too.
Placards at the entrance of a drill site in Balcombe. Photo: Getty

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

This article first appeared in the 12 August 2013 issue of the New Statesman, What if JFK had lived?

Getty
Show Hide image

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