Miliband bank debacle: has he just thrown away the election?

The value of taxpayer-owned banks drops by £1bn – and Osborne outflanks him with £7 minimum wage support

Column LAST UPDATED AT 14:15 ON Fri 17 Jan 2014

MORE than £1bn was wiped off the share price of banks owned by the taxpayer today as Ed Miliband’s plan to break up the retail banks began to look like a full-blown political debacle for the Labour leader. As of 2pm, RBS had dropped in value by £560m and Lloyds by £460m.

Long before Miliband laid out plans to force the banks to open up to more high street competition, share prices were tumbling.

As markets opened, Chuka Umunna, the shadow business secretary, had to admit on Radio 4's Today programme: "I am not denying in the short term that we may see a hit on the share price of these banks. It’s probably happening as we speak now…"

Robert Peston, the BBC’s business editor, warned that any fall in the share price could force the Tory-Lib Dem coalition to postpone the privatisation of its third stake in Lloyds and cut the value of the taxpayers’ controlling stake in RBS. Peston told the Today programme Miliband’s plan was a “very big fly in the privatisation ointment”.

"There was an expectation there would be another £7 billion of Lloyds shares sold in the spring," said Peston. "It’s moot whether £7 billion can be raised in the current circumstances. It’s also a bit uncertain whether you could write a sale prospectus when you don’t know what the shape of Lloyds would be and you might have to delay that sale until after the next general election." 

Now the “ointment” is all over Miliband’s face.

His banking plan had been billed by Labour as a political game-changer, potentially as popular as his plan for a freeze on energy prices, announced at last autumn's party conference.

Instead, it has backfired badly, with Mark Carney, the new Governor of the Bank of England, and a string of City experts lining up to rubbish Miliband.

The Labour leader had been hoping to seize the initiative on the economy where Ed Balls, his shadow chancellor, is still not trusted by the voters, according to opinion polls. But his initiative now risks increasing the doubts about Labour’s competence to run the economy – a catastrophic result if he frightens the voters. 

City analyst David Bewick told the Today programme: "I really cannot take his initiative seriously and if it was, it would be extremely damaging to the UK economy… He would completely scupper the sale of the rest of Lloyds bank and the rest of RBS you can say goodnight Vienna to." He said HSBC could move back to Hong Kong if Labour won the election on this platform. 

Meanwhile, Chancellor George Osborne appeared to have pulled off a coup by announcing his support for an inflation-busting rise in the minimum wage from £6.31 to around £7 an hour to help the low paid.

Some business leaders were critical of the extra cost for small businesses, but The Times gave it the thumbs-up in an editorial this morning: "A small increase in the minimum wage will pay for itself and there is no better welfare policy than better pay."

Osborne’s initiative appears to have enhanced his position while Labour is left  looking seriously damaged on the economy. Will this turn out to be the day he threw away the 2015 election? No wonder Ed Balls is keeping his head down. · 

Disqus - noscript

There really are serious doubts regarding Ed Milliiband's competence. As Energy Secretary he failed to put into place a robust energy policy and we are suffering from the consequences of this casual, offhand and frankly inept management style. Again with the banks Mr Milliband has displayed a shallow grasp of the subject and ignored the obvious point that the sector is going through aperiod of transformation and there are no buyers for costly branches.

"His banking plan had been billed by Labour as a political game-changer, potentially as popular as his plan for a freeze on energy prices, announced at last autumn's party conference."

The freeze prices was never more than a cheap headline to appeal to gullible masses. Maybe now even the most gullible of people will realise he is all soundbites and no substance.

It seems even his own party have little faith; he lacks the support and authority to rid himself of the unpopular Balls so he is stuck with him, along with his equally inadequate wife.

When a party allows the unions to elect an immature klutz as leader, this is about what they deserve. Can he even look his brother in the eye?

I'm surprised by the notion that anybody thinks Miliband is competent to start with. If he is he's hiding it well.

...If even Osborne can outmanoeuvre Miliband, then Labour are in deep doo-doo.

It seems that there are no towering intellects within the Labour ranks - Rachel Reeves struggles to understand her brief - Yvette Cooper is blatantly political, regardless of the nation's interests, Balls is rather blinded by his prejudices, Miliband is naive and simplistic (and, of course, deep within the pockets of the Unions); the rest of this sorry bunch are such nonentities that I struggle to recall their names!

With the economy & minimum wage up & inflation down, they are sunk anyway

perhaps some legislation can be enacted to keep labour away from wrecking the economy even if they get into power. Problem is there are several other areas they cant be trusted with ... and before you know it you've had to legislate they arent allowed to touch anything!
Nice thought though.

It is David Buik not Bewick.

coz when the banks were private they were run well and for the benefit of all... weren't they? Why not nationalise fully at least one bank and have it off real banking services, you remember the sort of things, interest on deposits, staff, long mortgages on small properties. it would certainly scare the bejasus out of the others.

These "game changers" sound great when you're hive-minding with your fellow spads over free-trade skinny lattes. They hit the real world and go down faster than the Rev. Flowers in the toilets of a Manchester nightclub.

What Tory drivel. Is this written by someone from CCHQ?

So it looks as though the only people who take Milliband's plans seriously are the BBC - no surprise there then.

Create two new banks? Haven't we just seen the failure of the Co-op to pick up Lloyds branches and there were no other takers. Where is Milliband going to find buyers for excess branches - I suspect he hasn't a clue. The idea of limiting a business's ability to grow sounds like something from the old Soviet Union or one of it's satellites. This is clearly another barmy idea from a Labour party clutching at straws. Whilst this light weight team heading up Labour continue to come up crackpot ideas on the economy it's hard to see any thinking person taking them seriously. We gave them one shot at destroying the economy do we really want to give them another?