If you think bankers do a bad job of banking, just wait until government tries its hand. This seems to be what Ed Miliband is proposing today: a Labour government would set up two new banks, to challenge the existing five big ones. And so his 1970s revival continues. There’s no evidence that new banks would help much, as the Bank of England Governor has already indicated. But as I say in my Telegraph column today, Ed Miliband isn’t too worried about lack of evidence. He’s proposing to be a different kind of political leader.
His list of ‘predators’ – ie, nasty businesses to whom he promises to give six of the best – grows longer all the time. Energy companies, short-term lenders, people who make fixed-odds betting machines, homebuilders – and, now, high street banks. Spank, spank, spank, spank, spank.
He was speaking without notes, so I’d like to think the following quote was a mistake. But I fear not:-
‘On day one of the next Labour government, we will ask the Competition & Markets Authority to report within six months on how to create at least two new sizeable and competitive banks to challenge the existing high street banks… This is not about whether we have new banks, but how.’
The last Labour government worried about cartels — but, crucially, it relied upon the Competition Commission (soon to become the CMA) to investigate whether an industry was acting like a cartel. This was an arm’s-length body and would devote up to 24 months on proper investigations whose outcomes were usually seen as fair. Tony Blair’s point was that government would not (and should not) have the power to beat up on an unpopular industry.
Now, Miliband is quite keen on beating up industries. It’s becoming his USP. As he says, he doesn’t care if the CMA thinks we need a new bank. Or two. He wants them anyway and just wants advice on how they’d be set up. At times like these, even Conservatives have occasion to be glad of our EU membership: surely there are rules against government breaking up banks, without any evidence that they are abusing their power?
But you can’t fault Miliband for lacking ambition. Or, for that matter, intellectual honesty. He is taking aim at ‘predators’ and engaging in ‘pre-distribution’ with the hope of reliving the ‘cost of living crisis’: it all fits perfectly with what he has told us he is about. He’s the quiet radical, forging a new form of left-wing populism. This can work with voters, as Francois Hollande demonstrated. (But it doesn’t work as a governing strategy, as Francois Hollande has also demonstrated.)
I was interviewed by BBC News Channel about this earlier and asked: what about the 1989 Beer Orders? Didn’t Maggie Thatcher decide that the brewers were ripping off punters by wholly-owning too many pubs and not allowing general competition? That’s true, and she did order pub selloffs and guest beers.But she didn’t have government set up its own brewery. (Probably because she knew that government would struggle to organise a piss-up inside it).
Simon Walker from the Institute of Directors put it well today:-
‘The state has a very poor history of creating competition in banking. The last time the Government told a bank what to do, Lloyds was ordered to sell branches to Reverend Flowers, and we all know how that ended.’
Miliband is far more, em, optimistic about the power of government to reorganize the economy. You can bet he won’t stop at banks. He really does believe that Britain’s main problem is not enough power wielded by the government.
Given that he’s still the bookies’ favourite to be Prime Minister after the next election, it’s time to be very afraid.
Subscribe to The Spectator today for a quality of argument not found in any other publication. Get more Spectator for less – just £12 for 12 issues.