So George, tell us, when exactly did you decide to back Obama’s banking reforms?

by Stephen Tall on January 22, 2010

The Tories’ shadow chancellor George Osborne was proud to declare on this morning’s BBC Radio 4 Today Programme that he had been in favour of banking reforms now being championed by President Obama – to break up the big banks – “since last July”. This will come as something of a surprise to anyone who’s been following Tory policy on the banking industry over the past six months.

In fact, let’s take a look at what the Tories were saying last July, the month the party launched its white paper on financial regulation. Mr Osborne put forward six policy proposals – you can read them here – yet none of these mentioned breaking up the big banks.

If you plough through 33 pages of the full 57-page white paper document, you will eventually find a reference to breaking up the banks – but couched in the kind of vague, equivocal language which makes clear that the Tories won’t seriously consider doing anything that touches them:

While there are some valid arguments for [splitting up the banks] if implemented at an international level, it would not be feasible or desirable for the UK to impose an absolute separation unilaterally. Instead, we will instruct the Bank of England to instead use capital and liquidity requirements to achieve the same objectives, while continuing to examine the case for a more structural approach in international forums.”

To answer the question posed in the headline … It’s pretty clear when the Tories decided to champion breaking up the banks: when President Obama made his announcement – in the hope that they can coat-tail on his ‘change we can believe in’ schtick.

Contrast the Tory shadow chancellor’s flakeyness on economic policy with Vince Cable’s sure-footedness and consistency. Vince has been calling for the breaking up of the big banks since November 2008, arguing even then that the Government should “get rid of [the banks’] investment banking casino operations, which are underwritten by a taxpayers’ guarantee, in order to concentrate resources on their mainstream lending”.

And Vince, having been the first to set out this policy, has stuck to it ever since: see, for example, public statements in December 2008, February 2009, March 2009, July 2009 and September 2009.

Of course, it’s more important to be right than first. But if, as George is, you’re so often wrong and last, people begin to doubt if you can really be trusted running an economy with such deep-seated problems. Especially if you boast about spending only 40 per cent of your time thinking about the economy, make £3 billion mistakes when proposing savings, and break expenses rules when claiming for your second home.

Sixteen months on, and it’s still fair to ask the question LDV posed in October 2008: Is it time for the Tories to ditch George Osborne?