Ed Balls knows how to talk to bankers. Having been Gordon Brown’s right hand man and City Minister under the last government, he is well known in the Square Mile—and far more popular than you might think.

Earlier this month, Balls was to be found having lunch at HSBC’s private bank in St James. He was there to address the chairmen of the UK banks. Those present left this private lunch with the distinct impression that Balls was presenting himself as a restraining influence on Ed Miliband, and someone who could protect them from some of the Labour leader’s more radical policies.

Balls made clear to the group that he was a ‘sceptic’ of regional banking. He also assured them that having helped introduce an independent Competition Commission, he didn’t want to see government telling the Competition and Markets Authority what to do.

This assurance was particularly important to these bankers. They are very worried about Miliband’s plan to order the Competition and Markets Authority to report on how to carve two new challenger banks out of the existing banking market.

As I say in the Mail on Sunday, those close to Balls deny that there is a split with Ed Miliband. They stress that Balls is in favour of these two new challenger banks and the regional branches of the British Investment Bank that Labour is proposing.

But the private lunch did reveal a crucial difference between Balls and Miliband. Balls want to respect the independence of the Competition and Markets Authority while Miliband wants to instruct it on what to do.

This difference speaks to a wider split between the two men. Balls is a pragmatist, he wants to deal with the economy as it is. But Miliband wants to remake British capitalism.

Balls is known to have concerns about this agenda, to think that it is too abstract and too difficult to implement. He is also one of the shadow Cabinet members most concerned about Labour’s lack of support among business.

Over the next few months, Miliband will detail his vision for a new model for the British economy. But the challenge for Miliband is how can he persuade voters he can deliver it, if his own shadow Chancellor hasn’t fully signed up to it?

Tags: bankers, banking, Banking reform, Ed Balls, Ed Miliband, Labour, UK politics