Ed Miliband has promised a major reform of the banking sector if Labour wins the 2015 general election, saying there will be a “reckoning” among the big banks.
Under new plans announced by the Labour leader on Friday, major high street banks that are deemed to have too much of a market share will be forced to sell off branches within 12 months, if Labour were to win the next general election.
Speaking at the University of London, Miliband said, “We need a reckoning with our banking system, not for retribution, but for reform… This is not about whether we should have new banks – that is the question this government is still asking – but about how.”
He promised, “An end to the fast buck with a new culture of long-termism, from our infrastructure to our takeover rules to the stock market.”
He also said that Labour’s plans would stimulate the“building [of] a new economy [whilst] tackling the cost-of-living crisis.”
“Under a Labour government, you will no longer be serving the banks. Instead, the banks will be serving you”, he added.
Miliband also said that by creating two new challenger banks, competition will be significantly increased: “On day one of the next Labour government, we will ask the Competition and Markets Authority to report within six months on how to create at least two new sizeable and competitive banks to challenge the existing high street banks.”
Despite the chancellor George Osborne claiming that the government’s economic plans were working in light of recent growth figures, Miliband said, “If the government thinks a few months of better statistics will solve this crisis, it is just demonstrating again that they have absolutely no idea about the scale of the problem or the solutions required.”
Reacting to the Labour leader’s comments, Katja Hall, chief policy director at the CBI, said that “caps on market share [were] too simplistic.”
The announcement has been welcomed by some however, including business leaders, some of whom have called for big banks to be broken down due to a lack of competition.
Last year, Lawrence Tomlinson, who is also an adviser to business secretary Vince Cable, told Blue & Green Tomorrow last year that big banks such as Lloyds and the Royal Bank of Scotland were operating within an “oligopoly”.
“When you have a small number of banks monopolising the markets, there is no incentive for them to sharpen their pencils and help people out. One of the biggest barriers to growth in the economy is access to finance – or rather the lack of it”, he said.