Chuka Umunna's speech on financial services: full text

The shadow business secretary says bankers must face "the prospect of jail for gross wrongdoing".

Thank you for that introduction and thank you for inviting me here today.

The importance of the City to British business

For us, the future of financial services - the City - is incredibly important. Any potential Government hoping to take office and any current party of Opposition charged with scrutinising what the Government does, should want to see the City thrive.

It is a key business sector which - along with the associated legal, accountancy and other professional services - gives us a competitive edge and a comparative advantage due to our talent, our legal system, the liquidity of our financial markets and our time zone.

It is a sector which we look to pump oxygen into the rest of the economy, helping businesses in other sectors expand and grow.

The need for business growth was starkly highlighted in the recent Budget. We learnt that the Government is now borrowing £245bn more than it planned, with welfare spending up by £20bn and nearly one million young people unemployed. The Government’s interest seems to be exploiting our economic problems, as we have seen on welfare, rather than solving them. They are trying to blame the very families who are paying the price for the Government’s failure. What we actually need is action now to boost house building and get people back to work with a compulsory jobs guarantee. And we need a different kind of economy with a financial system that serves our businesses.

When we talk about diversifying our economy, we are not talking about reducing the size of our financial services sector but growing the size of other sectors of the economy. The financial services sector has a crucial role to play in that diversification, which is why - to coin a phrase - I am intensely unrelaxed about the problems small businesses and entrepreneurs face in dealing with our banks.

And, of course, it goes without saying that the sector performs vital utility functions for us as individuals. Like water and electricity, our banks are essential to every day life, safeguarding our deposits, providing a payment system and so on.

So my first point is this: we are unapologetically critical of the City when needs be but we cannot be anything other than pro City, given its central importance to the economy at home and paying our way in the world abroad.

Restoring the reputation of the City and rebuilding trust

Next, if the City is to continue to perform its functions – as a global financial hub and provider of finance to the real economy at home, it must command trust and confidence.

The attempted rigging of LIBOR, the gross misselling of interest rate swap products to small businesses and the payment protection insurance scandal, amongst other things, have done immeasurable damage to the international and domestic reputation of the City.

After these events, there were the usual expressions of regret from senior management, a reprimand and/or a fine from the regulator and strong adverse comment from Westminster. Yet, there was little visible collective action on the part of the sector as a whole.

Given the collective hit the sector has sustained through all these scandals, is it not time for there to be a very visible coming together of the principle players in the sector to address the ongoing reputational crisis the sector faces – a public summit of the key industry leaders where action points can be agreed and then implemented?

Yes, regulators and Government have a role to play, but supervision and regulation cannot act as a substitute for trust – you cannot regulate or legislate for being trust worthy.

So my second point is this: if the sector is to recover trust, it needs to be seen to very visibly be getting its own house in order. That is why I very much welcome today’s event.

It is why I welcome the fact that there are those who are now speaking out engaging in the public debate, leading the process of change. Anthony Jenkins at Barclays and Stephen Hester at RBS are doing this and Anthony Browne, newly installed at the British Bankers Association, has said his main mission is restoring trust. Good.

But much more needs to be done and there are still many lessons to be learnt. Barclays releasing details of £40m worth of bonuses to senior executives at the same time as the Budget announcement sent all the wrong messages and is indicative of this.

It goes without saying that politicians are not in a position to lecture on trust – we are less popular than you and we learnt the hard way after the expenses scandal, when we had to get our house in order. But at least the people saw politicians brought to book – with some of our number serving time in jail for their wrongdoing.

Particularly in respect of the LIBOR rigging scandal, it seems to me that we will not rebuild trust with the public or affect a culture change in finance until custodial sentences are imposed on those guilty of criminal wrongdoing in your sector. It cannot be right that someone who seeks to cheat the benefits system out of a couple of hundred pounds in my constituency may well be thrown into jail for doing so, but those who seek to rig the financial system and receive hundreds of thousands of pounds as a result never seem to suffer the same fate. Is not the prospect of jail for gross wrongdoing one of the best ways we can affect a culture change?

Changing culture and making our banks safe

This brings me to my third point: if our banks are to rebuild trust, we need to see a change in culture in the sector and our banks must be made safe. Never again must we be in a situation where they have the potential to bring down our entire economy; never again must the perception or reality be that the interests of those in the sector are being put ahead of the customers and beneficiaries the sector is supposed to serve.

So today, it is essential that the reforms under way to address these two interconnected issues must be completed and implemented in full.

Structural reform to separate retail from investment banking activities is not just necessary from the point of view of stability and security, it will also improve the culture in our banks. Both the Independent Commission on Banking and ongoing Parliamentary Commission on Banking have made various recommendations in this regard. We are clear: if the letter and spirit of the ICB’s proposals are not delivered and we do not see cultural change in our banks, we think full separation will be necessary.

And whilst action at the level of the institution is important, institutions are made up of individuals, which is why remuneration arrangements that create the right incentives and behaviours are important as well. The EU has led reform in this area.

But, beyond reform of pay, there must be much stronger individual responsibility for decisions made and action taken. That is why we have argued for a new code of conduct for bankers. As Ed Miliband said in his banking speech last July, just as the doctors and lawyers professions have clear rules and codes of conduct which lay down what is expected, we need the same for banking where anyone who breaks the rules can be struck off.

Of course, structural reform and stronger individual responsibility are not a panacea; we need proper resolution mechanisms, making it easier and less costly to sort out banks that get in to trouble, and greater capital and other loss absorbing capacity in our banks as well.

At this juncture I should say we should have better regulated the banking sector during our time in office but we didn’t and that is a source of regret.

In fact, mea culpa in that respect is due across the political spectrum given the consensus which existed around a more light touch approach before the crash. During the Second Reading of the Financial Services and Markets Bill in July 1999 my opposite number, Vince Cable, expressed broad support for the regulatory framework we put in place, saying its “philosophy” and “architecture” reflected “a broad consensus” – consequently neither of the two current parties of Government voted against FSMA in Opposition.

A banking system that serves the real economy

Finally, we need a banking system that better serves the real economy – one of my principal concerns as Shadow Business Secretary is that it does a better job for British industry and our small businesses.
This is not just a problem of the recent banking crisis. We have had a banking system that is too concentrated – with five banks serving nearly five million businesses – for some time. And with too little diversity of business models – where if one bank will lend you money they all will, and if one bank won’t, they all won’t.

So we would reduce the barriers to entry for challenger banks to create more choice, building on the recent proposals of the old FSA.

We are delighted that Nationwide – a mutual – will enter the market for business lending next year.

We want more sources of alternative finance, from innovations in factoring like MarketInvoice or in peer to peer lending like FundingCircle which Labour local authorities are using to invest money in local businesses.

And we are arguing for a proper British Investment Bank, with funds distributed not through the existing bank network as in the Government’s proposal, but through a new network of geographically mandated regional banks – a British version of the German Sparkassen.

Therefore my fourth and final point is that if the sector is to do a better job for our wealth creators, we need not just more competition “in” banking but more competition “to” banks as well.

Conclusion

Let me finish by saying this: today, I represent many City workers in my Lambeth constituency. What they do matters enormously to Britain’s place in the world and to the growth of the global economy. Having worked in the City myself for several years, I know the overwhelming majority of people there, yes, want to do well, but are hardworking, honest people who want to do a good job for our country too.

But I also see on Streatham High Road, which runs through the middle of my constituency, the struggles of the businesses in other sectors who struggle to access finance and the long term, patient capital to grow. They are my constituents too.

All we ask is that in addition to providing a global hub which helps the UK compete, our financial sector does a far better job for them at home too.

Thank you.

Shadow business secretary Chuka Umunna speaks at last year's Labour conference in Manchester. Photograph: Getty Images.

Chuka Umunna is Labour MP for Streatham and Chair of the All Party Parliamentary Group on Social Integration.

John Moore
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The man who created the fake Tube sign explains why he did it

"We need to consider the fact that fake news isn't always fake news at the source," says John Moore.

"I wrote that at 8 o'clock on the evening and before midday the next day it had been read out in the Houses of Parliament."

John Moore, a 44-year-old doctor from Windsor, is describing the whirlwind process by which his social media response to Wednesday's Westminster attack became national news.

Moore used a Tube-sign generator on the evening after the attack to create a sign on a TfL Service Announcement board that read: "All terrorists are politely reminded that THIS IS LONDON and whatever you do to us we will drink tea and jolly well carry on thank you." Within three hours, it had just fifty shares. By the morning, it had accumulated 200. Yet by the afternoon, over 30,000 people had shared Moore's post, which was then read aloud on BBC Radio 4 and called a "wonderful tribute" by prime minister Theresa May, who at the time believed it was a genuine Underground sign. 

"I think you have to be very mindful of how powerful the internet is," says Moore, whose viral post was quickly debunked by social media users and then national newspapers such as the Guardian and the Sun. On Thursday, the online world split into two camps: those spreading the word that the sign was "fake news" and urging people not to share it, and those who said that it didn't matter that it was fake - the sentiment was what was important. 

Moore agrees with the latter camp. "I never claimed it was a real tube sign, I never claimed that at all," he says. "In my opinion the only fake news about that sign is that it has been reported as fake news. It was literally just how I was feeling at the time."

Moore was motivated to create and post the sign when he was struck by the "very British response" to the Westminster attack. "There was no sort of knee-jerk Islamaphobia, there was no dramatisation, it was all pretty much, I thought, very calm reporting," he says. "So my initial thought at the time was just a bit of pride in how London had reacted really." Though he saw other, real Tube signs online, he wanted to create his own in order to create a tribute that specifically epitomised the "very London" response. 

Yet though Moore insists he never claimed the sign was real, his caption on the image - which now has 100,800 shares - is arguably misleading. "Quintessentially British..." Moore wrote on his Facebook post, and agrees now that this was ambiguous. "It was meant to relate to the reaction that I saw in London in that day which I just thought was very calm and measured. What the sign was trying to do was capture the spirit I'd seen, so that's what I was actually talking about."

Not only did Moore not mean to mislead, he is actually shocked that anyone thought the sign was real. 

"I'm reasonably digitally savvy and I was extremely shocked that anyone thought it was real," he says, explaining that he thought everyone would be able to spot a fake after a "You ain't no muslim bruv" sign went viral after the Leytonstone Tube attack in 2015. "I thought this is an internet meme that people know isn't true and it's fine to do because this is a digital thing in a digital world."

Yet despite his intentions, Moore's sign has become the centre of debate about whether "nice" fake news is as problematic as that which was notoriously spread during the 2016 United States Presidential elections. Though Moore can understand this perspective, he ultimately feels as though the sentiment behind the sign makes it acceptable. 

"I use the word fake in inverted commas because I think fake implies the intention to deceive and there wasn't [any]... I think if the sentiment is ok then I think it is ok. I think if you were trying to be divisive and you were trying to stir up controversy or influence people's behaviour then perhaps I wouldn't have chosen that forum but I think when you're only expressing your own emotion, I think it's ok.

"The fact that it became so-called fake news was down to other people's interpretation and not down to the actual intention... So in many interesting ways you can see that fake news doesn't even have to originate from the source of the news."

Though Moore was initially "extremely shocked" at the reponse to his post, he says that on reflection he is "pretty proud". 

"I'm glad that other people, even the powers that be, found it an appropriate phrase to use," he says. "I also think social media is often denigrated as a source of evil and bad things in the world, but on occasion I think it can be used for very positive things. I think the vast majority of people who shared my post and liked my post have actually found the phrase and the sentiment useful to them, so I think we have to give social media a fair judgement at times and respect the fact it can be a source for good."

Amelia Tait is a technology and digital culture writer at the New Statesman.