Safer banking will mean the same rotten service at a higher price

Cross-party support made the release of the Vickers report on banking reform less of an event than it might otherwise have been. Vince Cable looked almost benign on the Commons bench beside George Osborne. Ed Balls had nothing new to say. After all their lobbying beforehand, bankers got no sympathy for the £7 billion that Vickers says ring-fencing and re­capitalising their retail operations will cost, and barely bothered to protest. Ring-fencing, as I have repeatedly argued, is far from a complete defence against the full range of banking follies. But nor need it be a disaster for banks’ profitability, given the eight-year implementation timetable within which they will be able to squeeze costs to fit. What I do wonder is whether — in a regime with higher barriers to entry and in which existing banks will clearly seek to pass more costs to personal and business customers — Vickers has killed any possibility of a significant wave of user-friendly new entrants into the high-street market. If so, a safer banking system will mean the same old rotten service and poor choice, but at a higher price.

America’s dark side

The market narrative I identified two weeks ago, in which US banks seem to be threatening to bring the inter-bank lending shutter down on their European counterparts in anticipation of a crash, was encouraged by American remarks, including those of Treasury secretary Timothy Geithner, at the G7 finance ministers’ meeting in Marseilles. One unnamed US official was quoted as saying that ‘75 per cent of the dark things happening in the world economy are because of the eurozone’. That may not be wholly wrong but it downplays the dark side of Obama’s failed stimulus measures and America’s lingering mortgage-debt malaise, while carrying the flavour of the President’s habit of calling BP ‘British Petroleum’ during last year’s Gulf of Mexico oil-spill disaster. If America can find a foreign bogeyman to distract from domestic mismanagement, it will. And an American panic over the solvency of European banks is a sure way to turn the current  fearful mood into Credit Crunch II.

12 issues for £12

Nissan note

Three glimpses of the real economy. First, the 25th anniversary of the opening by Margaret Thatcher of the Nissan factory at Sunderland — an icon of North-eastern self-esteem and one of the world’s most efficient car plants, now producing the Qashqai model and about to produce the all-electric Leaf. It’s worth remembering what brought Nissan here: a single-union agreement and the availability of workers willing to adopt the Japanese doctrine of ‘continuous improvement’; the idea of Britain as an efficient launch pad for European markets, offering judicious grants, favourable taxes and cheap land; and importantly, the pro-enterprise thrust of Thatcher herself, so admired by Asian leaders.

Besides 5,000 Nissan jobs, another 50,000 were created or secured by inward investment into the region in that period. Not all endured — the Samsung plant at Wynyard is now the site for Teesside’s ‘super-hospital’, if it ever gets built. Is it possible to imagine ever celebrating another wave of foreign-owned factory openings? A mood of self-flagellating pessimism certainly won’t help. Let us recall how improbable a renaissance of British manufacturing looked in the decade before Nissan and others arrived from the east to make it happen. Set the taxes, incentives and employment rules right, strike the right leadership note as the rest of Europe stagnates — some time in the next decade it might, just might, happen again.

Beyond repair?

Second, the president’s lunch of the Heating and Ventilating Contractors’ Association, which I had the pleasure of addressing despite not knowing my condensing flue from my elbow — but then last year’s speaker was Ann Widdecombe, and I don’t think they booked me for my dancing skills either. Their trades are at the mercy of the construction industry cycle, which was on the up in the early summer but looks a lot weaker now. ‘There’s work around, refurbishment more than new-build, but you have to slash your price to get it,’ one member told me. The conversational tone is what you might call Keynesian Thatcherite: what they’d like from the Chancellor are lower business taxes and ‘plan B’ levels of public spending. I politely point out that they’re unlikely to get the latter, but that we could at least all agree about the state of Europe. If you were a boiler engineer looking at the single currency today, I said, you’d suck air through your teeth and mutter, ‘I don’t know what cowboy put that in for you, but we’re going to have to rip it out and start again…’

The last of England

Third, my pub of the week. En route to a wedding in the Savernake Forest I took lunch at the Three Tuns in Great Bedwyn, the perfect pit-stop after a long drive and with a long afternoon ahead: relaxed atmosphere, smiling staff, good food and drink swiftly served. But a note on the table says it will close at the end of the year. I ask the landlady, Jan Carr, what went wrong. The answer is that trade is down 30 per cent from its peak, battered by beer duties at £1 a pint, VAT at 20 per cent, sky-high fuel prices and competition from cheap supermarket booze. Winning accolades and working 70 hours a week isn’t enough to keep Jan and her chef husband, Alan, in business. An inn since 1756, the Three Tuns will be one of about 1,350 British pubs to close this year — the reality behind the ‘service-sector slowdown’ I referred to last week, and a growing hole in the social fabric. All I can suggest is that you divert off the A4 west of Hungerford for a fine lunch while you can, and remember Hilaire Belloc’s words, chalked on the Three Tuns menu board: ‘When you have lost your inns drown your empty selves, for you will have lost the last of England.’

This article first appeared in the print edition of The Spectator magazine, dated