THE root problem with regulating the banks is that the politicians are hand in glove with them. The Tories don’t even want to regulate the finance sector so long as it provides them with half their annual income year after year — not just the banks themselves, but the hedge fund billionaires as well.

Worse still, no attempt whatever has been made to deal with the fundamental point of corruption — that whatever the big five banks do, they will be protected by the “implicit guarantee” that the government will save them from themselves and bail them out because they’re “too big to fail,” too valuable an asset to lose, too crucial a part of running the state, etc.

Risk-taking at a bank that will always be saved is like playing Russian roulette, but with someone else’s head.

The problem is not what the state does, but that its hand is forced. Knowing that governments must bail out banks means parts of finance have become a one-way bet. The International Monetary Fund recently estimated that the world’s largest banks benefited from implicit government subsidies worth a total of $630 billion in the year 2011-12. This perversely makes debt cheap and promotes leverage.

In the US meanwhile there are proposals for the government to act as a backstop for the mortgage market, covering 90 per cent of losses in a crisis. Again this pins risk on the public purse: it’s the same old pattern, socialise the losses and privatise the gains.

Removing the subsidies banks enjoy will not only mean that debt becomes more expensive, so that equity holders will lose out on dividends and the cost of credit could rise. Much more importantly it means tackling the need for the reintroduction of “moral hazard” — the awareness that there will in future be no guarantee of a state bailout or reimbursement for reckless or incompetent lending.

It is inconceivable that this will happen when the political Establishment is so so deeply enmeshed in the finance sector.

The evidence for that is the bailout to the tune of £68bn, the failure to take any effective regulatory action against the banks for the last eight years and the postponement of raised capital buffers under Basel III till 2019.

Then there’s the ditching attack-dog Financial Conduct Authority chief Martin Wheatley after heavy bank lobbying, and now the imposition of the 2018 deadline for any further claims for the 10 million customers who were illegally mis-sold payment production claims they neither wanted nor needed.

This will only change when that cosy, collusive, symbiotic relationship between state and finance is peeled away, made transparent and transformed into a proper arm’s length working partnership. That requires a fundamental shift in the power structure, and the rise of Corbyn is the best hope in the last 50 years that this might be achieved.

• Michael Meacher is Labour MP for Oldham West and Royton. These articles first appeared on his blog www.michaelmeacher.info/weblog.

QUIETLY and surreptitiously, George Osborne is marking out his pitch for the leadership. The trouble is, it’s a thoroughly bad pitch. By denigrating opponents of privatisation he has set his face against the 70 per cent of the population who earnestly want rail renationalised — a proportion so large that it must include nearly half the ones who’re Tories.

Osborne must assume that the case for privatisation of rail, as for every other takeover or outsourcing of public assets, is done and dusted and nothing more now needs to be said. If so, that is a very arrogant assumption — easy to make if, like Osborne, you don’t listen to what people are really feeling. Rail privatisation in 1996-7 was an ideological exercise, never justified on the evidence. A former Tory MP described it as “the poll tax on wheels.”

British rail fares are now the most expensive in Europe by a measure of 40 per cent and rail privatisation is now costing the British taxpayer £4 bilion a year in subsidies — more than a third of the net cost of the EU to Britain. And half of the British taxpayers most heavily hit are Tories! Well done, George.

It is extraordinary that not long ago the Tories were seen as the party of pragmatism and flexibility, and Labour was the party of ideology. That has completely reversed. The Tories now have an obsessive fetish with contracting out the state, regarding the use of our public funds for investment in British industry as taboo (though paying Chinese and French state companies handsomely for investing in British industry), generating the biggest white elephant of all time at Hinkley C because of their ideological aversion to renewable power.

There are other pitfalls that will come back to haunt Osborne. He has shown no concern whatever, and frankly no pity or compassion over what he has already inflicted on a third of the population through five years of grinding austerity, whereas Thatcher’s Bernard Ingham did at least have the grace to apologise for the desolation she caused in the north.

But increasingly it is the middle class and Tories who are also now being hit — consultants, doctors, services for the elderly and infirm.

Then there’s the all-important issue of austerity as the government’s guiding principle. Public opinion is clearly changing on this — it probably changed a long time ago, but Osborne’s tin ear blocked it out and only the Jeremy Corbyn movement brought it to light. If Osborne doesn’t now change his position on this, which will be seen as a deep political humiliation, he’ll be in serious trouble.

If he does change, the prospects for bringing down the budget deficit will all but collapse. Over to you, George.