Banks tried to hide their bonuses, but now the game is up. What next?

Britain has always valued a sense of fair play. It is time to demand a fair banking system.

2011 was a year of constraint and contrition for the banking sector. Bonus pools were reduced, balance sheets slimmed down and high profile bankers heroically waived their bonuses.

Or so the banks' PR machines would have had us believe. Last Friday, as analysts trawled through Barclays and RBS's annual report and Lloyds' pay statement, a very different picture emerged from that painted by the banks.

Bob Diamond's pay packet for 2011 could be as much as £17.7 million. The head of state-backed RBS' investment banking division, John Hourican, was handed a package worth £7.4 million. And the Chief Executive of Lloyds netted £3.5 million. All in all Barclays, Lloyds and RBS paid out in excess of £90 million to top executives in 2011.

There is a clear injustice in a sector which is implicitly and explicitly subsidised by the taxpayer awarding itself bloated rewards at a time when the public are enduring austerity cuts, a squeeze on real incomes, and rising unemployment.

But the public outrage taps into something deeper. After all, the British sense of fair play has always been premised on there being haves and have-nots.

Public anger taps into the stark fact that the banking system is failing to fulfil some of its basic functions because the industry is grotesquely skewed towards socially unproductive activities that allow a small elite to extract vast wealth to the detriment of the many.

Despite a financial crisis, a £1.2 trillion bailout and ongoing public outcry, it can still seem like there is no viable alternative to business as usual. But it is worth reminding ourselves that this is not universal: the British banking system stands out from its US and European counterparts.

Firstly, the UK banking sector is one of the most concentrated in the world. In the retail sector six large national banks account for 92 per cent of personal current accounts, 85 per cent of mortgages, and 88 per cent of small business accounts .

Secondly, it is one of the least diverse in terms of the types and functions of financial providers. Whereas in the UK, the big four dominate the high street, in Germany a wide range of local and mutually owned banks have a 70 per cent share of the market for loans and deposits.

Thirdly, it is the largest in size relative to our economy. Assets of UK banks are almost six times GDP, compared to the US where they are roughly equal.

These features enabled the City to generate huge profits in the boom years, but they are also root causes of its inability to serve the needs of households and businesses.

The financial crisis exploded the myth that profits booked in the financial sector means wealth for the UK. Figures from the IMF show that despite the fact that, in relative terms, the UK banking sector is six times the size of its US equivalent, it generates the same amount of total tax revenue -- less than a paltry 2 per cent.

Now the long-term effects this British exceptionalism are clear for all to see. We have a banking system unable to allocate credit to viable businesses, provide bank accounts to low-income households, or even keep our money safe.

According to the New Economics Foundation, the UK lags other countries in achieving universal access to financial products and services, with 1.5m adults still lacking a current account. The branch network continues to shrink with a 44 per cent reduction since 1990 leaving more communities unbanked.

And Britain's small businesses struggle more than their European and American counterparts to access credit, with some 370,000 SMEs failing to secure loan finance from mainstream financial institutions in 2011 alone.

But what comes next?

Martin Kettle recently argued that the mood of the nation is to muddle along. The public just want to get back to normal with as little fuss as possible. Whilst it may be true that there is little appetite for a revolutionary overthrow of liberal capitalism, there is clear evidence that there is growing interest in a different way of doing things.

The alternative financial sector has flourished in the aftermath of the financial crisis -- filling the gaps where the big banks are simply unable to provide.

Households and businesses are becoming increasingly dependent on these alternatives. Unfortunately their rise is paralleled -- in fact dwarfed by the increase in doorstop and payday lenders which only goes to demonstrate the size of the unmet market demand.

These alternative institutions are still a tiny part of the financial ecosystem. But the sector is at a tipping point. It now needs to work together to create a narrative which takes it beyond a niche industry. It needs to the let the public know that there is alternative out there, and why its better for them.

That's why we have launched Move Your Money UK, a campaign encouraging people to move their money to ethical, local or mutual financial providers. There is appetite for change. We may not be in a revolutionary moment, but the public are no longer willing to accept business as usual from our banking sector and are looking for something better.

Louis Brooke is a co-founder of Move Your Money UK. Follow the campaign on Twitter @moveyourmoneyuk and Facebook.

Louis Brooke is a spokesperson for Move Your Money UK, a not for profit campaign group, promoting alternatives to the big banks. He is also communications manager for London Rebuilding Society, and co-founder and chairman of educational resource company now>press>play.

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Tom Watson rouses Labour's conference as he comes out fighting

The party's deputy leader exhilarated delegates with his paean to the Blair and Brown years. 

Tom Watson is down but not out. After Jeremy Corbyn's second landslide victory, and weeks of threats against his position, Labour's deputy leader could have played it safe. Instead, he came out fighting. 

With Corbyn seated directly behind him, he declared: "I don't know why we've been focusing on what was wrong with the Blair and Brown governments for the last six years. But trashing our record is not the way to enhance our brand. We won't win elections like that! And we need to win elections!" As Watson won a standing ovation from the hall and the platform, the Labour leader remained motionless. When a heckler interjected, Watson riposted: "Jeremy, I don't think she got the unity memo." Labour delegates, many of whom hail from the pre-Corbyn era, lapped it up.

Though he warned against another challenge to the leader ("we can't afford to keep doing this"), he offered a starkly different account of the party's past and its future. He reaffirmed Labour's commitment to Nato ("a socialist construct"), with Corbyn left isolated as the platform applauded. The only reference to the leader came when Watson recalled his recent PMQs victory over grammar schools. There were dissenting voices (Watson was heckled as he praised Sadiq Khan for winning an election: "Just like Jeremy Corbyn!"). But one would never have guessed that this was the party which had just re-elected Corbyn. 

There was much more to Watson's speech than this: a fine comic riff on "Saturday's result" (Ed Balls on Strictly), a spirited attack on Theresa May's "ducking and diving; humming and hahing" and a cerebral account of the automation revolution. But it was his paean to Labour history that roused the conference as no other speaker has. 

The party's deputy channelled the spirit of both Hugh Gaitskell ("fight, and fight, and fight again to save the party we love") and his mentor Gordon Brown (emulating his trademark rollcall of New Labour achivements). With his voice cracking, Watson recalled when "from the sunny uplands of increasing prosperity social democratic government started to feel normal to the people of Britain". For Labour, a party that has never been further from power in recent decades, that truly was another age. But for a brief moment, Watson's tubthumper allowed Corbyn's vanquished opponents to relive it. 

George Eaton is political editor of the New Statesman.