Ed Miliband's banking reform speech: the full details

In another no-notes speech, the Labour leader will promise to introduce a cap on banks' market share and to create two new challenger banks.

So well-trailed has Ed Miliband's speech on the economy been that it is easy to forget he hasn't actually delivered it yet. That, and George Osborne's announcement that he favours an above-inflation rise in the minimum wage, means Miliband may struggle to command the attention of the media tomorrow. But the speech, which I'm told by a Labour source he will deliver without notes, is an important guide to the narrative he will pursue in the months to come. With average wages likely to outstrip prices at some point this year, he will seek to reframe the "cost of living crisis" as a long-term problem that will only be solved through long-term changes to the economy. Here's the key passage:

This Government thinks it is all going to be OK because this year the forecasts say that average wages will eventually overtake prices. Let’s hope that happens. But I really warn this Government: if they think a few months of better statistics will solve this crisis, they are just demonstrating again that they have absolutely no idea about the scale of the problem or the solutions required.

This cost-of-living crisis is about who gets the rewards, not just the averages: ordinary people or just those at the top? It is about the nature of work and whether it is secure or insecure. It is about the prospects for people’s kids and the quality of jobs. It is about decent homes at affordable prices. It is about a strong sense that this cost-of-living crisis has been coming for a long time.

As expected, Miliband will cite the banking sector as an area that will need to be dramatically reformed if the economy is to deliver sustained increases in living standards for the majority of the country. The intention is to deliver what his chief strategist Stewart Wood calls a "supply side revolution from the left". He will say: "At our Party Conference in September, I talked about how we will reform Britain’s broken energy market.  The big energy firms didn’t like it. But it is broken. And only Labour will put it right.

"Today, I want to talk about another broken market: Britain’s banking system. There can be no bigger test of whether we are serious about building a new economy and tackling the cost-of-living crisis than reforming Britain’s banks.

"Part of the reason we rely too much on low paid, insecure work is that the small and medium sized firms - that could create the good, high paying jobs of the future - can’t get the finance they need.

"Of course, financial services are an important industry in itself. But for an industry that calls itself a ‘service’, it has been an incredibly poor servant of the real economy. Not just since 2010 - or 2008 - but for decades in this country. We need a reckoning with our banking system, not for retribution, but for reform."

Taking inspiration from the US, where banks are subject to a national deposit cap of 10% and a state-level cap of 30%, he will pledge to introduce a legal limit on the market share any one bank can have of personal accounts and small business lending.

If we carry on as we are, we will end up stuck with the same old banks dominating our high street: the old economy. In America, by law, they have a test so that no bank can get too big and dominate the market. We will follow the same principle for Britain and establish for the first time a threshold for the market share any one bank can have of personal accounts and small business lending.

Labour sources insist that the party has no exact figure in mind, rejecting the 25% limit reported by Newsnight on Tuesday, instead stating that they will be guided by three main aims:

1. To improve the price and quantity of lending to small businesses

2. To improve service to all customers

3. To create at least two new challenger banks with significant market shares

Miliband will announce that Labour will instruct the Competition & Markets Authority to report within the first six months after the election on how to implement this plan, ruling on:

  • How many additional branches the big banks will need to sell off and other regulatory changes needed to bolster competition
  • The timetable for the divestment of branches beginning within six months of the report and completed within a five year parliament
  • The maximum threshold for future market shares which would automatically trigger another CMA  investigation if breached - and prevent any merger or acquisition taking place which exceeds that threshold.

He will conclude: "I want to be clear about the difference this will mean: this is not about whether we should have new banks - that is the question this Government is still asking - but about how. It is not about creating new banks that control some tiny proportion of the market. But new banks that have a substantial proportion and can compete properly with existing banks. And we are not asking whether existing banks might have to divest themselves of significant number of branches. We are asking how we make that happen."

"After decades of banking becoming more and more concentrated, Labour will turn the tide. I want to send a message to our small and medium sized businesses: Under a Labour government, you will no longer be serving the banks. Instead, the banks will be serving you: you will have a better chance of getting the support you need to grow your business, employ more people, at decent wages, making profits and helping Britain succeed."

In response, we can expect the Tories and the Lib Dems to reply that they will take no lectures on banking reform from a member of the government that presided over the biggest financial crisis in modern history. To this, Miliband will remind the Tories that they were calling for less, not more, regulation before the crash, while also acknowledging the failings of the last Labour government in this area (as he has done many times before).

But while many in Labour will welcome Miliband's renewed commitment to a transformed economic model, some are disappointed by the absence of a clear "retail offer" in what is his first speech of the new year. With the Tories making landmark pledges such as the guarantee to preserve the triple lock on the state pension and coming out in favour of a large increase in the minimum wage, the pressure is likely to grow on Miliband to offer more doorstep-friendly policies sooner rather than later.

Miliband will say the banking system has been "an incredibly poor servant of the real economy." Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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How tribunal fees silenced low-paid workers: “it was more than I earned in a month”

The government was forced to scrap them after losing a Supreme Court case.

How much of a barrier were employment tribunal fees to low-paid workers? Ask Elaine Janes. “Bringing up six children, I didn’t have £20 spare. Every penny was spent on my children – £250 to me would have been a lot of money. My priorities would have been keeping a roof over my head.”

That fee – £250 – is what the government has been charging a woman who wants to challenge their employer, as Janes did, to pay them the same as men of a similar skills category. As for the £950 to pay for the actual hearing? “That’s probably more than I earned a month.”

Janes did go to a tribunal, but only because she was supported by Unison, her trade union. She has won her claim, although the final compensation is still being worked out. But it’s not just about the money. “It’s about justice, really,” she says. “I think everybody should be paid equally. I don’t see why a man who is doing the equivalent job to what I was doing should earn two to three times more than I was.” She believes that by setting a fee of £950, the government “wouldn’t have even begun to understand” how much it disempowered low-paid workers.

She has a point. The Taylor Review on working practices noted the sharp decline in tribunal cases after fees were introduced in 2013, and that the claimant could pay £1,200 upfront in fees, only to have their case dismissed on a technical point of their employment status. “We believe that this is unfair,” the report said. It added: "There can be no doubt that the introduction of fees has resulted in a significant reduction in the number of cases brought."

Now, the government has been forced to concede. On Wednesday, the Supreme Court ruled in favour of Unison’s argument that the government acted unlawfully in introducing the fees. The judges said fees were set so high, they had “a deterrent effect upon discrimination claims” and put off more genuine cases than the flimsy claims the government was trying to deter.

Shortly after the judgement, the Ministry of Justice said it would stop charging employment tribunal fees immediately and refund those who had paid. This bill could amount to £27m, according to Unison estimates. 

As for Janes, she hopes low-paid workers will feel more confident to challenge unfair work practices. “For people in the future it is good news,” she says. “It gives everybody the chance to make that claim.” 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.