Britain needs smaller banks. It needs banks which are no longer so big, uncompetitive and dangerous. And if splitting up the banks is what’s needed to address this, that’s precisely what the Government needs to do.
Not Ed Miliband’s words, but those of a certain George Osborne. For, as the Labour leader gives his major speech setting out his plans for overhauling Britain’s financial sector, it’s worth reflecting on what the Chancellor’s position on the country’s banks was before the general election. Given he recently took the decision to resist a wholesale split up of RBS, it might seem surprising, but he was one of the first and most vocal proponents for splitting up UK banks.
As evidence, consider his speech to the RSA on April 8 2009. Now, frustratingly the Conservatives appear to have purged the internet of their archive of pre-election speeches, but happily enough newspaper articles exist to give one at least some fragments of the Osborne break-up argument. For instance, here’s the key bit:
“We cannot allow one part of our economy to behave in a way that puts the rest of the economy at risk when it fails. We need to think deeply about whether we can sustain banks that are not only too big to fail, but potentially too big to bail.
Now, there is a key difference between what Osborne was saying in 2009 and what Ed Miliband is implying today. The Osborne argument to split up banks applied specifically to those owned by the taxpayer. The Miliband argument is, among other things, about imposing regulations restricting the size of all banks, including those, such as HSBC or Barclays, which are owned by private investors.
All the same, the point remains: the Chancellor was vocally keen on splitting up at least some of Britain’s biggest banks, for precisely the same reason as Ed Miliband, ahead of the election. For various reasons – some think because of the euro crisis, some think because of the fiscal cost – Osborne rowed back from these pre-election pledges. He did not split up RBS or Lloyds (though the Co-op disaster led, in its own disjointed way to the hiving-off of TSB). However, the principles that led him to that position have now been embraced wholeheartedly by Ed Miliband.
h/t to Andrew Lilico for reminding me about this.