The Banking Crisis Is Yet Another Reminder of Why This is Miliband's Moment

Ed Miliband went to the City on Monday of this week to give a speech on the banking crisis. There was not much unusual about that, you might think. But the way he opened his address said almost everything you need to know about Ed Miliband's leadership and his sense of where his party is headed.

Ed Miliband went to the City on Monday of this week to give a speech on the banking crisis.

There was not much unusual about that, you might think. But the way he opened his address said almost everything you need to know about Ed Miliband's leadership and his sense of where his party is headed.

Miliband didn't open that speech with LIBOR, or with the technicalities of the Vickers Report, or even with his demand for a judge-led public inquiry. He opened it with a story about a family called the Hendersons, who run a small sign-making company in Putney.

The Hendersons have been ripped off by their bank. Having asked for a loan to help build their business, they felt bullied into buying a fancy financial product that gambled their money on the rising and falling of interest rates. It was a gamble that did not pay off. They lost hundreds of thousands of pounds, undermining their company and turning their lives upside down as a result. Efforts to negotiate with their bank have been fruitless. They been palmed off onto six different 'relationship managers' feeling more intimidated than supported.

Miliband was deeply affected by this story. Partly, of course, because of the human tragedy involved. But also because he was convinced it demonstrated two fundamental facts about the British economy, facts which in turn reveal the way in which our politics is headed.

First, the Hendersons were treated so poorly not because of one rogue trader, but because of a systematic failing in our banking system. It was the incentive structure of the banks that led the Henderson's "relationship manager" to behave as he did. The product that the Hendersons' debt was sold on the financial markets by their bank. That's where the money for the bank came from. The profit they were seeking came from casino betting on the markets, not from customer satisfaction. The Hendersons suffered, in other words, because the institutions and rules of our banking system are wrong. Not because of the behaviour of one bad banker.

Second, the Hendersons are not the usual kind of victim. Unlike previous economic crises, current failure in Britain's economy spreads pain right across British society. In the 1930s and 1980s, the industrial North floundered, while new industries sprang up in the Midlands and the South. We are used to that kind of unequal recession. Now, though, livelihoods across the whole of the country are threatened by the failure of our core economic institutions. Banks not lending. Some of them even corrupt. Businesses can't invest. Wages are stagnant. The employment prospects for the young are bleaker than they have been in living memory. We live, then, with an economic order that does not serve people like the Hendersons. Not just one that penalises the very poorest.

For Ed Miliband these facts define our current political moment. They show that the debate Britain needs to have is not about the short-term, although the need for growth and employment is clear. It is about the long-term nature of our economic order. It is about new rules, new incentives and new practices that will enable Britain's economy to start to serve the interests of working people of all backgrounds once again.

Miliband knows that it is hard sometimes to keep the focus on the scale of this challenge during the day-to-day whirl of Westminster party politics. But he also knows that the real political battleground is shaped by the factors that shape everyday life in Britain, not by what captures the attention of headline writers. That's why the Hendersons' story is more important in the long run than George Osborne's attempts to smear Ed Balls, or even than Bob Diamond's appearance at the Treasury Select Committee. And that's what our politicians will be dragged back to time and time again in the run up to the next general election.

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