David Cameron will fully nationalise RBS

by Jonathan Todd

We didn’t think the reputation of the financial sector could sink any lower. The Libor-fixing scandal means it has. We may be less surprised that the government’s deficit reduction strategy continues to hurt and not work. When government borrowing jumped to £17.9bn in May, up from £15.2bn in the same month last year, this was confirmed.

These two factors make the impossible seem possible: David Cameron will seize the initiative by an audacious full nationalisation of RBS and its reconstitution as a national infrastructure bank.

The logic that leads to this implausible conclusion involves three stages to this parliament and an evolving contest for national leadership.

Stage one: Two parties together in the national interest.

This must now seem a golden age from the perspective of Downing Street. The political law of this bygone time was that Labour had made the economic mess and Cameron’s government was taking the tough actions needed, with an expectation that the economy would recover well before the general election, which Cameron would win on the back of this success.

Attempts to have Labour adjust to a reality in which fiscal credibility has an increased political salience – such as In the Black Labour – retain an important relevance to our party. But times have moved on. It is ever more obvious that the government’s tight fiscal policy isn’t working.

As the government goes to Olympian efforts to keep their omnishambles rolling, ever more eyebrows are raised, querying whether these good chaps know their apples. They lost the benefit of the doubt long before Chloe Smith spectacularly crashed into the national consciousness.

Stage two: Attacks which seek to undermine the basis of Labour’s claim to national leadership.

Stage one hoped for clear, absolute victory. The economy would have unambiguously improved and credit for this would flow to Cameron. Grim economic reality has caught up with stage two and Cameron aspires only for a relative victory. The economy might be tough but it would be worse if Labour were in charge.

Attempts to hobble Ed Miliband’s character are wrapped up with claims that Labour have been bought by the trade unions and are too close to welfare claimants and Brussels. Cameron is supposed to have told cabinet that: “A bit of fuel panic is not a bad idea”. Being able to blame trade unions for unpopular outcomes, such as fuel shortages, is a weapon to be used against Labour.

Miliband has indicated a willingness to change the way trade unions fund Labour as part of a wider reform of political funding, Liam Byrne has changed Labour policy on welfare, and Miliband is rumoured to be intending to change Labour’s position on an EU referendum.

As Labour takes the sting out of attacks based upon charges of Labour dependency on trade unions, softness on welfare and deference to Brussels, Cameron may be drawn to something more dramatic.

Stage three: Pre-emptive rebuttal of Labour attempts to undermine Tory claims to national leadership.

This stage seeks to convert Tory weaknesses into strengths before Labour is able to make them fatal. The most attractive prospect for Cameron on this front is repositioning on banking.

Miliband is licking his lips at the prospect of the Libor-fixing scandal being as useful to him as the phone hacking scandal. The parallels are all too apparent. “A few rogue reporters”, said News International. “A few rogue traders”, said Barclays.

Will Cameron sit back and allow Miliband to make hay at his expense? Not if he can help it.

Is Cameron capable of making unexpected and effective moves when his back is to the wall? Yes, as was shown by fighting off the election that never was in autumn 2007 and the “big, open and comprehensive offer”, which stole victory from the jaws of defeat in 2010.

While leading economists and bankers advocate this strategy, Miliband shies from calling for RBS to be fully nationalised and reconstituted as a national infrastructure bank. This creates an opening, which Cameron may be desperate enough to seize.

Dan Hodges famously declared David Miliband the winner of Labour’s leadership election on Uncut. My prediction that Cameron will fully nationalise the RBS is made more tentatively. But what I say with certainty is that Cameron will struggle to win the election on the basis of an objective claim to economic success (stage one), his attacks on Labour as sectional may also be inadequate to this task (stage two), and he is not going to go quietly into the night (stage three).

If a risk needs to be taken to win, Cameron will take it. If it requires ideological promiscuity, this would not be a problem to cross dresser Cameron. Fully nationalising RBS would be a risk, but it was a risk for Benjamin Disraeli to extend the franchise and, in politics, there can come a point where the seemly most risky course is actually the least so.

Cameron has many political weaknesses but a lack of appreciation of this dimension of politics is not amongst them. Labour should recognise who we are up against.

Jonathan Todd is Labour Uncut’s economic columnist

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10 Responses to “David Cameron will fully nationalise RBS”

  1. Nick says:

    Is the government going to pay the fines when the companies it runs are involved in Libor fixing?

  2. aragon says:

    “Attempts to have Labour adjust to a reality in which fiscal credibility has an increased political salience – such as In the Black Labour – retain an important relevance to our party.”

    No they do not, this is just Tory Lite which the Tories are regarded as been better at, and are still failing. In the black Labour is for people not willing to reject the current orthodoxy.

    I thought a National infrastructure Bank was Labour policy? Labour should invest in Infrastructure in a way the Tories never will and make the banks serve the economy (through structural change including complete separation or retail and investment arms).

    I am not sure this requires an Infrastructure Bank or that RBS should provide the foundation of such a bank. But that matters less than the act of infrastructure investment.

    RBS should have been fully nationalised, as it’s current hybrid model does not appear to have any advantages. Off shored or outsourced work at RBS should be brought back to the UK.

    The policy of the UK Government should be that critical UK infrastructure should be managed in the UK by UK citizens and therefore subject to UK laws and control (national security).

  3. Anon E Mouse says:

    Jonathan Todd

    What “deficit strategy” is “hurting but not working”?

    Have Labour activists not got a single brain cell of their own?

    This government is borrowing MORE than the lat one. They are NOT reducing the nation’s debts. They are increasing them.


    The last bunch of infrastructure Labour invested in has put 6 hospital trusts on the edge of bankruptcy and costs the taxpayer £225 to change a lightbulb.

    The last thing this country needs is any more of Labour’s big plans that don’t work…

  4. swatantra says:

    Dave will not nationalise RBS. It goes against all conservative philosophy. The Conservatives are against State intervention and wil not cross the line, they’d rather let Banks and Businesses go to the wall and thousands thrown out of their jobs rather than give support, even in times of national crisis. Nationalisation is an anathema to Conservatives; it just goes against their grain. They let Northern Rock be sold off to Branson instead of letting it go back to being a mutual.
    As for Disraeli he was always a One Nation Tory and believed the working classes could actually be bribed to vote Tory, if he threw them a few tit bits, and still preserve the status quo and established class structure. And he was right.

  5. BenM says:

    “What “deficit strategy” is “hurting but not working”?”

    Er, the Tory one.

    You know – the one where the Right got all hubristic making claims about the benefits of cutting public expenditure which have been proven to be totally wrong?

    “This government is borrowing MORE than the lat one”

    You sound surprised? This is what we on the Left warned you would happen. Spending cuts do not equal deficit reduction.

    Once again the Left is vindicated by real world experience and the Right is left flailing around trying to throw in ever more desperate attempts to keep itself in power mud while merrily wrecking the lives of ordinary people.

    “The last bunch of infrastructure Labour invested in has put 6 hospital trusts on the edge of bankruptcy and costs the taxpayer £225 to change a lightbulb.”

    The Tories dreamed up the PFI wheeze. Yet another Tory policy which has exploded in the face of the taxpayer.

  6. Robin Thorpe says:


    Whilst I do not disagree with the sentiment of what you are saying, I must take issue with the last point.

    Just saying it was a Tory idea does not absolve the former Labour government of it’s responsibilities for the overspending through PFI. They were frightened of being labelled as a “tax and spend” government (although why this a bad thing defeats me, this is surely one of the objectives of national government – to maintain civil infrastructure) and so chose to disguise the debt as privately financed. Furthermore the briefs for the schools and hospitals were neither prudent nor pragmatic. Hospitals were built with copper and oak cladding, schools with aluminum fascias and both with new and expensive IT systems.
    In an additional extension of Tory policy this was all centrally mandated; the same Tories that crow about reducing the state actually enhance central control by removing powers from local authorities. In effect removing locally accountable administration and replacing it with swollen Whitehall departments (happened under Thatcher and Major but not reversed by Blair and Brown).
    How the current PLP move beyond this I am not sure but mistakes were definitely made.

    To comment on the article I am not sure that Cameron will be so audacious; as previously commented nationalisation is anathema to the Tories and the number of U-turns made by Cameron/Osborne suggest they are not particularly brave.

  7. BenM says:

    @Robin Thorpe

    I agree with you 100% on PFI. I don’t wish to absolve the last Labour government at all from its use of these wildly expensive, wasteful and illogical scams – sorry, schemes.

    I was shooting at another AnonEMouse fox, that’s all.

  8. Anon E Mouse says:


    All you were doing was your usual dishonest smearing as proven by your response to Robin Thorpe.

    Guess what though BenM. Everybody reading your postings realises that what I’m saying is true and the silly tribal nonsense from people like you has given the country the most useless PLP in history and until they apologise for not being bold with the massive majority they had in 1997 they are simply unelectable.

    I remember you claiming Gordon Brown was a great Prime Minister though so frankly your judgement is certainly in question I’m afraid….

  9. anne todd says:

    No, I don’t think that DC will nationalise RBS – I think it just goes against all Conservative belief – still very much following the Capitalist model.

    I don’t think it is a mad idea to nationalise RBS – or even to nationalise some of the other services such as the postal service and rail service which have been put into private owership – it seems like the chief executives are just creaming off their big bownesses and salaries – certainly the banks are not improving their service to their customers, and I am not totally sure the postal service has been much improved since it has been in private hands either.

  10. I think this could work, it needs some proper looking into. Obviously they wouldn’t lend to a real no hoper but to SME’s that need funds to expand and to start ups with reasonable business plans. We need to take a few risks and invest in new science, technology and energy projects. If some Mr Dyson types come along we need to be more receptive and lend rather than make them jump through so many hoops and waste their valuable time trying to qualify to a criteria that is as narrow as a hairs breadth they end up not getting the funding and having wasted a few thousand of their own money in the process. No wonder all our good people go abroad. There has to be something to break through this economic blockage and lift us up again.

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