Chris Blackhurst: Labour's magnificent seven will not make any difference to high street banking, Ed Miliband is merely showboating

As they will have no track record to speak of, they will find it harder to raise capital to fund their activities

Never underestimate the ability of politicians to grasp a populist subject and turn it into a crusade. Show them a bandwagon and they'll rush to climb aboard, no questions asked.

In their clamour they will confuse issues if necessary, blurring fact and reality, allowing or even encouraging one argument to dominate and cloud another.

This approach comes into its own when the subject is complex and not easily resolved, but nevertheless touches a widespread nerve.

Throw in a general election in the offing and the stage is set fair for posturing on a grand scale, proclamations that cannot be justified, and promised policies that will not make any tangible improvement.

So it is with Labour and the banks. Ed Miliband has decreed that five high street banks are not enough, and that we must have two more.

Apparently, there is too little competition between them.

Ed wants to ensure more banks are vying for our business and in particular that they're willing to lend to small and growing companies.

Since when were five regarded as too few? To my mind, five brands to choose from represents a healthy selection. And, why are seven so much better than five?

The two newcomers will be smaller and friendlier, and more willing to engage with ordinary folk, apparently.

Really? How will they be any different from the current five, which all have specialist consumer units and divisions that specialise in lending to small and medium enterprises (SMEs)?

Still, the move will allow Labour to boast of the creation of two extra banks and make the party appear as though it's really achieved something concrete.

The truth is the new banks will face the same regulatory constraints as the established players. The supervisory authorities will insist they apply the same ratios and procedures.

Worse, as they will have no track record to speak of, they will find it harder to raise capital to fund their activities.

But, why the obsession with the high street banks in the first place? Increasing numbers of customers are conducting their banking on the internet, without ever setting foot inside a branch. To insist on the establishment of two more bank brands when others are closing branches due to lack of business is perverse. Next, Mr Miliband will demand the re-opening of Woolworths and all those retailers that were hammered by the worldwide web and the supermarkets, in some sort of rose-tinted return to how we were.

Even in the days of yesteryear, when we like to suppose bankers were all Captain Mainwaring types who knew our families and kept a paternal eye on our financial affairs, there wasn't much competition. You went to the local bank, the one your parents went to – what you did not do was hold a beauty parade involving seven contestants for the right to maintain your current account.

It's not clear at all what the banks have actually done to merit increasing their number. Their high street operations were not, repeat not Ed, remotely responsible for the global credit crisis. That was caused by banks in the US extending loans to customers who struggled to repay them, and those loans being bundled up for on-sale to international speculators.

Quite what the high street staff of the HSBC across the road from the office where I write this had to do with the meltdown is a mystery. Of course, the banks had investment-banking arms and,in some cases, those "casino" bankers damaged the entire group and forced it to go cap in hand to their governments to be rescued. However, their activities were a million miles away from the humdrum branches in Britain.

Those high street banks did make one significant contribution to the mess, in that they all too freely parted with their cash, making advances to borrowers on skimpy security and heating up the property bubble. All that, ironically, overseen by a Labour government.

Perhaps this is what Mr Miliband wants to see us return to – that, just as the economy is exhibiting signs of recovery and house prices are beginning to rise again, he would like to ensure bank lending similarly soars and anyone can gain access to funds. Presumably, in the Labour leader's new, improved universe, someone's borrowing application can be rejected by five banks but they may still go along to the sixth and seventh and obtain what they require.

Such an outcome is insane, but that is what is likely to occur. Mr Miliband wants to break up the banks, to give them a right duffing, and guarantee that in future none of them can claim they're "too big to fail". There is nothing wrong with that sentiment – he's correct to be aggrieved. But he can't get close to the nub of the problem – the investment banks and their aggressive, reckless pursuit of profits – because that is too complex to tackle, and would require multi-national co-operation and take forever (more than five years on from the disaster it is not even close to being achieved). Meanwhile, a unilateral putsch would threaten the hegemony of the City of London, and while Labour is not the Square Mile's greatest fan, the party leadership is all too aware of its contribution to the national economic purse.

Therefore, Mr Miliband is reduced to tilting at an irrelevancy. Ever the showman, though, he chucks into the same pot the subject of bank bonuses (again, something that more or less bypasses the average high street branch) and lack of compassion for SMEs. This, too, is something of a canard.

Small firms that were any good in the recession tended not to struggle for funding. Plenty of businesses did find the tap switched off but they were deemed high risk by the banks. They were regarded as unlikely to survive the slowdown. In taking this view, the banks were not behaving unduly harshly – they were doing what any responsible lender would do under such circumstances, and they were being encouraged to take that stance by the banking regulators.

If Labour's two new banks adopt an alternative, sympathetic and relaxed approach then they could find they're soon in trouble. Now that better conditions are emerging, the banks should prove more amenable to would-be borrowers. Quite how the creation of two further banks will make that situation any healthier is impossible to discern.

Labour's sights have alighted on the easiest target, the one that is on the doorstep and enjoys the greatest resonance with the voting public. Everyone enjoys a moan about their bank – and at times the banks do treat their users with astonishing indifference, verging on contempt. A lot of that, though, is down to customer inertia – you're more likely to get divorced than switch banks. In that sense, it is our own fault.

Turning five into seven, however, is not the answer. It's not as if tinier, cosier institutions, indeed mutuals, are immune to trouble – witness Britannia and then the Co-op Bank, plus smaller building societies such as Derbyshire and Dunfermline that had to be rescued. As well as Labour's seven, we already have the Nationwide, plus other, regional societies that offer banking facilities.

Labour has fallen for a knee-jerk reaction which supplies that quintessential necessity of any modern political pledge: the attention-grabbing soundbite.

News
Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
News
people
Travel
travel
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
artCultural relations between Sydney and Melbourne soured by row over milk crate art instillation
PROMOTED VIDEO
Arts and Entertainment
Adèle Exarchopoulos and Léa Seydoux play teeneage lovers in the French erotic drama 'Blue Is The Warmest Colour' - The survey found four times as many women admitting to same-sex experiences than 20 years ago
arts + entsBlue Is The Warmest Colour, Bojack Horseman and Hobbit on the way
News
Two giraffes pictured on Garsfontein Road, Centurion, South Africa.
i100
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
News
Kenny Ireland, pictured in 2010.
peopleBenidorm, actor was just 68
News
i100
Arts and Entertainment
arts + ents
News
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Morrissey pictured in 2013
people
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features playground gun massacre
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices