Judging by the Today programme this morning, we may be moving into a different phase of the financial crisis. The opportunities for serious reform of the system may slowly be slipping away, and I’m frustrated that the party is still peddling what seems to me to be the wrong position on the banks.
Yes, we are calling for a UK version of the Glass-Steagall Act, separating investment banking from high street banking. That seems to be a bare minimum.
But the basic proposal is that we should use the government’s partial ownership of the banks to force them to lend more locally. We urgently need to face up to the fact that this hasn’t worked, won’t work and actually can’t work.
The UK banks are now so consolidated, and so focussed on the speculative economy, that they can no longer provide the kind of local lending infrastructure that we so desperately need – and which the USA has and which northern Europe has too. There is no local lending expertise; decisions are done according to formula, so in a recession, of course all their IT systems block the loans and tighten up overdraft conditions. They are not designed for that any more.
So for goodness sake, before we go any further, let’s take a distinctive Lib Dem position: break up the big banks, force them to disgorge the building societies they swallows, split them up regionally to rebuild our local lending infrastructure.
That is the way we can rebuild a real local enterprise culture – so we don’t have to rely on the next bubble just to fling us back into the delusion that we are wealthy.