It is surely a bittersweet moment for British socialism: 77 years after the Labour Party first fought a general election pledging to nationalise Britain's high street banks, the deed is finally half-done. But, oh Pyrrhic victory! The Government has taken a part share in the banking sector so that it might shore up, rather than undermine, the capitalist system.

In 1931, bankers were top of Labour's hitlist, having failed to avert a crash that brought down the Labour Government. In the ensuing election campaign, the party's manifesto was curt but to the point: “The banking and credit system of the country can no longer be left in private hands. It must be brought directly under national ownership and control.”

Even future moderates such as Ernest Bevin were caught up in the anti-City emotions of the moment. “You can talk about socialising your railways and other things,” he assured the party conference, “socialise credit and the rest is comparatively easy.” All of which was a gift to the Tories, who warned the electorate that even their Post Office savings might not be safe if Labour won. Labour did not return to power for another 14 years.

When, in 1945, they did finally win, they left the clearing banks alone. Only the Bank of England was nationalised and, even there, the emphasis was on continuity. The same chap stayed as Governor.

For the next 30 years, bank nationalisation was a dead issue until the 1971 Labour conference mandated the party to report on how to achieve “the public ownership of all the banks, insurance companies and building societies”. Decrying the wastefulness of rival banks clogging up high streets, the subsequent Green Paper emphasised how efficient it would be if there was just one “British Bank”. This worried unions representing bank employees.

Nonetheless, establishing a new all-conquering, taxpayer-backed, British Bank became party policy in 1976. But James Callaghan, the Prime Minister, was unwilling to refight the 1931 general election and had it sidelined before the 1979 campaign.

However, the ill-fated 1983 manifesto warned the banks that they would be nationalised if they did not co-operate with Labour's investment priorities.

What united these previous efforts to nationalise the banks was a common critique: that Britain's financial sector was too conservative and needed government control to force it to pump more credit into the domestic economy. It is ironic that the leading banks now find themselves part-nationalised because they were not conservative enough.

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