Creating more high-skilled, better-paid jobs through reforming Britain’s banks is crucial to increasing living standards, Ed Miliband argued today. Setting out his vision for Britain, Ed lambasted the Tories for their belief in ‘a race to the bottom’ with millions of British people struggling to make ends meet in insecure badly paid jobs. Labour would be much more ambitious for Britain. Major reform to the UK’s banks would provide the finance that businesses require to expand and increase their workforce.
The next Labour government will refer the British banking sector to the Competition and Market Authority. The CMA will be required to report within six months on how to create two new ‘challenger’ banks; how existing banks will be divested of some of their branches; and to set a threshold for market share. Banks will not be allowed to merge and banks that grow organically will be referred to the CMA if they exceed the market share. Currently the four largest banks dominate lending to SMEs (small and medium sized enterprises), with 85 per cent of the market. Ed is determined to introduce more competition so SMEs have a greater choice of sources of finance to meet the needs of their business.
Ed is right to identify banking reform as a major barrier to economic growth. Since 2010 there has been a £56bn drop in lending to businesses. The structure of British banking has been a problem for decades. Will Hutton in his seminal book The State We’re In sets out a powerful case for wholesale reform of the UK financial and banking sector to support the ‘real economy.’ Written 20 years ago, the problems Hutton describes have got worse and the case for action more compelling. Britain has the highest trade deficit in manufactured goods since 1953. Many of our towns and cities in the Midlands and the north, once the workshops of the world, have largely lost their manufacturing base and are too reliant on public sector employment. The majority of British people have suffered the worst decline in living standards since the 1930s.
The challenge facing Ed and the shadow cabinet is not developing policy on banking reform. With the Vickers commission, the parliamentary commission on banking standards and the future of banking commission, there is already plenty for a team of Labour ministers to get their teeth into.
More difficult will be cultural change. Two new banks will make a major difference to access to finance for SMEs if the financial advisers they employ have a different mindset. This won’t be easy to achieve as many staff joining the new banks will already have worked for one of the ‘big five’ banks. We need everyone working in Britain’s banks to recognise the vital role they have to play in supporting businesses to expand and create better-paid quality jobs.
What Labour candidates and activists need on the doorstep is a simple compelling message on how voting Labour will be better for businesses and create better-paid jobs. Here Labour has much work to do. In 2010 not a single major British company supported Labour. More choice in banking is important, but so is having clear policies on investment in infrastructure, science, technology and skills. Recent mixed messages on High Speed 2 haven’t helped. High-speed broadband still isn’t available in every town and village in the UK. Britain produces too few graduates in science, engineering and IT, and employers frequently complain that they can’t recruit the staff with the right skills and experience.
Ed Miliband deserves credit for being prepared to tackle reform of the banking and financial sector. Too many customers have complained for too long about high charges, poor service and an unwillingness to invest in well-run businesses. Yet Labour needs to remember that voters are more likely to ask us about whether their son or daughter will be able to get a good job than whether we can make it easier for them to change their bank account.
———————————————————
Sally Prentice is cabinet member for culture and leisure in Lambeth. She tweets @SallyPrentice and has a website www.sallyprentice.org.uk
Cameron’s riposte to Miliband is that the Coalition is clearing up Labour’s mess.
This riposte demonstrates that, as ever, the Tories just don’t get it.
The financial sector needs massive reform across the world not because of some alleged mess by politicians, but because the financial sector is rotten to the core. From the Wolf of Wall Street to Gordon Gekko to Fred the Shred and Bob Diamond.
Cameron is not prepared to take them on. He’d rather play puerile politics than tackle an industry that is bleeding us dry, forcing up the national debt, tipping countries into bankruptcy, unemployment and hopelessness.