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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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

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Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.