It hardly seems worth Ed Miliband’s time to actually make the speech on economics today, because it has been previewed, leaked and debated – almost sentence by sentence – all week.
There was a debate about the middle classes on Tuesday. Then there was the important commitment to competition in the banking sector, where he flagged the idea of a market cap, an important idea – but there are three practical problems with it.
First, there is a danger that it will lead to the big banks dumping poorer customers – though equally, there will be more banks available for them to choose from.
Second, his colleague Ed Balls has been opposed to this agenda practically since the womb, so it would be strange if he had suddenly undergone some kind of Pauline conversion. The fear is that it will be read as a piece of Labour positioning, part of an internal power struggle, rather than a serious contribution to policy.
Third, there are other ways of achieving the same objective. A market cap would be vulnerable to legal challenge and it would be fought through the courts by the big banks. There are European dimensions to the whole thing.
If this was the centrepiece of Labour’s strategy, there would need to be something else in reserve – if we are going to see real diversity in the local banking market in the UK, as other countries have, and to their huge economic benefit.
For the last few months, and with the help of the Joseph Rowntree Reform Trust, I was working with Baroness Kramer in the Lords (before she went into government) to develop implementable approaches to creating a new local banking infrastructure in the UK.
You can read the results here, and I hope you can – because this is crucial for the economy and political, published yesterday. It is important economically because:
• The big banks bad at assessing and pricing the risk of lending to small businesses, and are consequently no longer geared up to do so.
• Competitor countries have small banks. In the UK, just 3 per cent of banks are local, 34 per cent in the USA, 33 per cent in Germany and 44 per cent in Japan (and they all have better SME track record).
• Co-operative and savings banks reduce the drain of capital from urban centres and foster regional equality because of their ability to lend to SMEs.
• Our lack of local banks means that our recessions are likely to be deeper than theirs, and our SMEs are at a disadvantage.
The irony is that the Lib Dems were the only party to commit to banking diversity in their 2010 manifesto. It would be ironic if they were outflanked on their own issue by Miliband, and this is why it is important politically.
Perhaps it doesn’t matter, but to shift this particular objective it will require at least two parties committed to local banking diversity to make it happen.
It also provides Lib Dems with an answer to the question: how will you rebalance the economy and turbo-charge the recovery – the answer is that it is necessary to create an effective local lending infrastructure, able to recycle local deposits as local enterprise.
It also has the benefit of being true.
There are short-term policies we need, including hiving off more regional banks from RBS. There are long-term policies we need to make it easier to start local banks, and to create a legal structure for a co-operative bank (still not legal in this country, the Co-op Bank is just owned by a co-op, or it was).
But the most important shift we need to make is to accept that the big banks no longer have the infrastructure for lending to small business effectively.
We would then use the postcode lending data (a Lib Dem success, recently published) to calculate what they owe to fund a local lending infrastructure to lend where they are unable to.
It would be a version of Project Merlin which actually works, and it may be possible without legislation – though the threat of legislation would help – because it offers one huge benefit to the banks: an end to the argument, once and for all, about whether they are lending enough to small business.
* David Boyle is the author of the Re-banking the UK report and of Broke: How to Survive the Middle Class Crisis (Fourth Estate).