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.

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Angela Merkel's call for a burqa ban sets a disturbing precedent

The German chancellor's plan for a partial ban of the full-face veil is a clearly political move, which will do more to harm those women who wear it than protect them.

 

In these febrile times, women’s freedom and autonomy has become a bargaining chip in the poker game of public propaganda — and that goes double for brown, Muslim and migrant women. Angela Merkel should know as well as any other female politician how demeaning it is to be treated as if what you wear is more important than what you say and what you do. With the far-right on the rise across Europe, however, the German chancellor has become the latest lawmaker to call for a partial ban on the burqa and niqab.

We are told that this perennial political football is being kicked about in the name of liberating women. It can have nothing to do, of course, with the fact that popular opinion is lurching wildly to the right in western democracies, there’s an election in Germany next year, and Merkel is seen as being too soft on migration after her decision to allow a million Syrian refugees to enter the country last year. She is also somehow blamed for the mob attacks on women in Cologne, which have become a symbol of the threat that immigration poses to white women and, by extension, to white masculinity in Europe. Rape and abuse perpetrated by white Europeans, of course, is not considered a matter for urgent political intervention — nor could it be counted on to win back voters who have turned from Merkel's party to the far-right AFD, which wants to see a national debate on abortion rights and women restricted to their rightful role as mothers and homemakers.

If you’ll allow me to be cynical for a moment, imposing state restrictions on what women may and may not wear in public has not, historically, been a great foundation for feminist liberation. The move is symbolic, not practical. In Britain, where the ban is also being proposed by Ukip the services that actually protect women from domestic violence have been slashed over the past six years — the charity Refuge, the largest provider of domestic violence services in the UK, has seen a reduction in funding across 80% of its service contracts since 2011.

It’s worth noting that even in western countries with sizeable Muslim minorities, the number of women who wear full burqa is vanishingly small. If those women are victims of coercion or domestic violence, banning the burqa in public will not do a thing to make them safer — if anything, it will reduce their ability to leave their homes, isolating them further.

In the wake of the Brexit vote, racist and Islamophobic attacks spiked in the UK. Hate crimes nationally shot up by 42% in the two weeks following the vote on 23 June. Hate crimes against Muslim women increased by over 300%, with visibly Muslim women experiencing 46% of all hate incidents. Instances of headscarves being ripped off have become so common that self-defense videos are being shared online, showing women how to deflect the “hijab grab”. In this context, it is absurd to claim that politicians proposing a burqa ban care about protecting women: the move is transparently designed to placate the very people who are making Muslim women feel unsafe in their own communities.

When politicians talk about banning the burqa, the public hears an attack on all Islamic headscarves — not everyone knows the difference between the hijab, the niqab and the burqa, and not everyone cares. The important thing is that seeing women dressed that way makes some people feel uncomfortable, and desperate politicians are casting about for ways to validate that discomfort.

Women who actually wear the burqa are not invited to speak about their experiences or state their preferences in this debate. On this point, Islamic fundamentalists and panicked western conservatives are in absolute agreement: Muslim women are provocative and deserve to be treated as a threat to masculine pride. They should shut up and let other people decide what’s best for them.

I know Muslim women who regard even the simple hijab as an object of oppression and have sworn never to wear one again. I also know Muslim women who wear headscarves every day as a statement both of faith and of political defiance. There is no neutral fashion option for a woman of Islamic faith — either way, men in positions of power will feel entitled to judge, shame and threaten. Either choice risks provoking anger and violence from someone with an opinion about what your outfit means for them. The important thing is the autonomy that comes with still having a choice.

A law which treats women like children who cannot be trusted to make basic decisions about their bodies and clothing is a sexist law; a law that singles out religious minorities and women of colour as especially unworthy of autonomy is a racist, sexist law. Instituting racist, sexist laws is a good way to win back the votes of racist, sexist people, but, again, a dreadful way of protecting women. In practice, a burqa ban, even the partial version proposed by Merkel which will most likely be hard to enforce under German constitutional law, will directly impact only a few thousand people in the west. Those people are women of colour, many of them immigrants or foreigners, people whose actual lives are already of minimal importance to the state except on an abstract, symbolic level, as the embodiment of a notional threat to white Christian patriarchy. Many believe that France's longstanding burqa ban has increased racial tensions — encapsulated by the image earlier this year of French police surrounding a woman who was just trying to relax with her family on the beach in a burkini. There's definitely male violence at play here, but a different kind — a kind that cannot be mined for political capital, because it comes from the heart of the state.

This has been the case for centuries: long before the US government used the term“Operation Enduring Freedom” to describe the war in Afghanistan, western politicians used the symbolism of the veil to recast the repeated invasion of Middle Eastern nations as a project of feminist liberation. The same colonists who justified the British takeover of Islamic countries abroad were active in the fight to suppress women’s suffrage at home. This is not about freeing women, but about soothing and coddling men’s feelings about women.

The security argument is even more farcical: border guards are already able to strip people of their clothes, underwear and dignity if they get the urge. If a state truly believes that facial coverings are some sort of security threat, it should start by banning beards, but let's be serious, masculinity is fragile enough as it is. If it were less so, we wouldn't have politicians panicking over how to placate the millions of people who view the clothing choices of minority and migrant women as an active identity threat.

Many decent, tolerant people, including feminists, are torn on the issue of the burqa: of course we don't want the state to start policing what women can and can't wear, but isn't the burqa oppressive? Maybe so, but I was not aware of feminism as a movement that demands that all oppressive clothing be subject to police confiscation, unless the Met’s evidence lockers are full of stilettos, girdles and push-up bras. In case you're wondering, yes, I do feel uncomfortable on the rare occasions when I have seen people wearing the full face veil in public. I've spent enough time living with goths and hippies that I've a high tolerance for ersatz fashion choices — but do wonder what their home lives are like and whether they are happy and safe, and that makes me feel anxious. Banning the burqa might make me feel less anxious. It would not, however, improve the lives of the women who actually wear it. That is what matters. My personal feelings as a white woman about how Muslim women choose to dress are, in fact, staggeringly unimportant.

If you think the Burqa is oppressive and offensive, you are perfectly entitled never to wear one. You are not, however, entitled to make that decision for anyone else. Exactly the same principle applies in the interminable battle over women's basic reproductive choices: many people believe that abortion is wrong, sinful and damaging to women. That's okay. I suggest they never have an abortion. What's not okay is taking away that autonomy from others as a cheap ploy for good press coverage in the runup to an election.

This debate has been dragging on for decades, but there's a new urgency to it now, a new danger: we are now in a political climate where the elected leaders of major nations are talking about registries for Muslims and other minorities. Instituting a symbolic ban on religious dress, however extreme, sets a precedent. What comes next? Are we going to ban every form of Islamic headdress? What about the yarmulke, the tichel, the Sikh turban, the rainbow flag? If this is about community cohesion, what will it take to make white conservatives feel “comfortable”? Where does it stop? Whose freedoms are politicians prepared to sacrifice as a sop to a populace made bitter and unpredictable by 30 years of neoliberal incompetence? Where do we draw the line?

We draw it right here, between the state and the autonomy of women, particularly minority and migrant women who are already facing harassment in unprecedented numbers. Whatever you feel about the burqa, it is not the role of government to police what women wear, and doing it has nothing to do with protection. It is chauvinist, it is repressive, it is a deeply disturbing precedent, and it has no place in our public conversation.

 
 
 
 

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.