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.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Sport
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
News
Billie Whitelaw was best known for her close collaboration with playwright Samuel Beckett, here performing in a Beckett Trilogy at The Riverside Studios, Hammersmith
people'Omen' star was best known for stage work with Samuel Beckett
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'