by Jonathan Todd

It’s only when politicians have bored themselves through repetition that their message begins to hit home with their audience. I’ve heard this dictum attributed to both Gordon Brown and Peter Mandelson. Its genesis is of less practical consequence than the reality that Labour’s message of too deep, too fast is now hitting home.

The debates around the causes and management of the deficit are complex. The simplicity of Labour’s message overcomes this. The arguments to which today’s publication of the interim report from the independent commission on banking will contribute are also highly technical. Labour requires a straightforward, powerful line that resonates amid this detail.

This should be that we are for the whole country, not just the city. We’re not banker bashers. We’re with Kitty Ussher on the short-sightedness of that. But the financial sector isn’t presently delivering to the extent that it could for the rest of the country. It’s one of the few sectors in which the UK can claim true global leadership. Labour recognises and celebrates this success.

However, unlike George Osborne, we do not interpret this prowess as a carte blanche for the sector. What is in the best interests of the city of London is not always in the best interests of the UK economy. The flawed assumption that these interests are aligned has driven policy since Margaret Thatcher and Osborne cannot see beyond this.

President Eisenhower asked the president of General Motors, “Engine Charlie” Wilson, to become secretary of defence in 1953. At his senate confirmation hearing he was asked whether he could make a decision in the interest of the US that was adverse to the interest of GM. Wilson reassured that no such conflict could arise.

“I cannot conceive of one because for years I thought what was good for our country was good for General Motors, and vice versa”.

Osborne is a later day Wilson. Blind to competing interests between one sector and the country as a whole. Of course, for the most part, but not always, what was good for GM was good for the US. Profits for GM meant jobs and wages for Americans. At the same time, finance does many things that are in the interests of the UK. Dorset, for example, is very grateful for J P Morgan, its largest private sector employer.

Labour doesn’t deny these benefits. Likewise we don’t deny the need for public sector cuts. But there is a world of difference between prudent fiscal management and an ideological assault on the state. Similarly, acknowledging the benefits of finance is quite different from not asking the questions that Osborne doesn’t want to ask: have our banks both ceased to be too big to fail and been reformed such that they will not again need state bailouts? Are large bonuses indicative of excellence or a lack of competition? Is competition adequate to ensure the best service to households and businesses? Are we maximising the extent to which the banking sector complements the rest of the economy?

It is this final question that allows us to pivot from today’s report to the growth debate. Both the banker-bashers and Osborne offer different kinds of either/or approach. Either we bash the banks to pieces or they will eat us, in the first case. Either we leave the banks alone or we’ll kill the goose that laid the golden egg, in the latter.

Both these extremes are false choices. The golden egg, for one thing, isn’t so golden when the goose can only be sustained by enormous subsidy. For another, the goose will stop laying any eggs if it is bashed to smithereens. The eggs on which we are keenest are those in the form of industries able to be new sources of comparative advantage in our Asian century. Little will be more important to our long-term growth prospects than our development of firms able to trade with and tap into the rapidly increasing wealth of Asia.

We need to stop thinking of Asia as somewhere that we outsource to and start seeing it as somewhere that we sell to. UK PLC needs a major reorientation. The financial sector should be greasing the wheels of this transition to the fullest extent possible. For government, out of deference to the city, to fail to apply whatever policies best encourages this would be for government to succumb to producer capture. Exactly the same vice as bedevils Andrew Lansley’s NHS reforms.

We want to put the patient, not the doctors, first in the NHS. Equally, the interests of the bank’s customers should always be a higher policy priority than those of the banks themselves. Only then will government be acting for the whole country and not just a sectional interest.

Truth is finally beginning to be told to the Murdoch empire. To which Jeremy Hunt will doubtless remain tone deaf. Another set of vested interests and concentrated power may have also reduced Osborne. But today we demonstrate that we are neither producer-captured nor bank bashers, but in touch with the real needs of households and business.

Jonathan Todd is Labour Uncut’s economic columnist.

Tags: independent commission on banking, Jonathan Todd, Osborne, the City

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