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.

Jeremy Corbyn. Photo: Getty
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Jeremy Corbyn: “wholesale” EU immigration has destroyed conditions for British workers

The Labour leader has told Andrew Marr that his party wants to leave the single market.

Mass immigration from the European Union has been used to "destroy" the conditions of British workers, Jeremy Corbyn said today. 

The Labour leader was pressed on his party's attitude to immigration on the Andrew Marr programme. He reiterated his belief that Britain should leave the Single Market, claiming that "the single market is dependent on membership of the EU . . . the two things are inextricably linked."

Corbyn said that Labour would argue for "tarriff-free trade access" instead. However, other countries which enjoy this kind of deal, such as Norway, do so by accepting the "four freedoms" of the single market, which include freedom of movement for people. Labour MP Chuka Umunna has led a parliamentary attempt to keep Britain in the single market, arguing that 66 per cent of Labour members want to stay. The SNP's Nicola Sturgeon said that "Labour's failure to stand up for common sense on single market will make them as culpable as Tories for Brexit disaster".

Laying out the case for leaving the single market, Corbyn used language we have rarely heard from him - blaming immigration for harming the lives of British workers.

The Labour leader said that after leaving the EU, there would still be European workers in Britain and vice versa. He added: "What there wouldn't be is the wholesale importation of underpaid workers from central Europe in order to destroy conditions, particularly in the construction industry." 

Corbyn said he would prevent agencies from advertising jobs in central Europe - asking them to "advertise in the locality first". This idea draws on the "Preston model" adopted by that local authority, of trying to prioritise local suppliers for public sector contracts. The rules of the EU prevent this approach, seeing it as discrimination. 

In the future, foreign workers would "come here on the basis of the jobs available and their skill sets to go with it. What we wouldn't allow is this practice by agencies, who are quite disgraceful they way they do it - recruit a workforce, low paid - and bring them here in order to dismiss an existing workforce in the construction industry, then pay them low wages. It's appalling. And the only people who benefit are the companies."

Corbyn also said that a government led by him "would guarantee the right of EU nationals to remain here, including a right of family reunion" and would hope for a reciprocal arrangement from the EU for British citizens abroad. 

Matt Holehouse, the UK/EU correspondent for MLex, said Corbyn's phrasing was "Ukippy". 

Asked by Andrew Marr if he had sympathy with Eurosceptics - having voted against previous EU treaties such as Maastricht - Corbyn clarified his stance on the EU. He was against a "deregulated free market across Europe", he said, but supported the "social" aspects of the EU, such as workers' rights. However, he did not like its opposition to state subsidy of industry.

On student fees, Corbyn was asked "What did you mean by 'I will deal with it'?". He said "recognised" that graduates faced a huge burden from paying off their fees but did not make a manifesto commitment to forgive the debt from previous years. However, Labour would abolish student debt from the time it was elected. Had it won the 2017 election, students in the 2017/18 intake would not pay fees (or these would be refunded). 

The interview also covered the BBC gender pay gap. Corbyn said that Labour would look at a gender pay audit in every company, and a pay ratio - no one could receive more than 20 times the salary of the lowest paid employee. "The BBC needs to look at itself . . . the pay gap is astronomical," he added. 

He added that he did not think it was "sustainable" for the government to give the DUP £1.5bn and was looking forward to another election.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.