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.

Photo: Getty
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Labour's purge: how it works, and what it means

The total number of people removed will be small - but the rancour will linger. 

Labour has just kicked off its first big wave of expulsions, purging many voters from the party’s leadership rolls. Twitter is ablaze with activists who believe they have been kicked out because they are supporters of Jeremy Corbyn. There are, I'm told, more expulsions to come - what's going on?  Is Labour purging its rolls of Corbyn supporters?

The short answer is “No”.

If that opener feels familiar, it should: I wrote it last year, when the last set of purges kicked off, and may end up using it again next year. Labour has stringent rules about expressing support for other candidates and membership of other parties, which account for the bulk of the expulsions. It also has a code of conduct on abusive language which is also thinning the rolls, with supporters of both candidates being kicked off. 

Although the party is in significantly better financial shape than last year, it still is running a skeleton staff and is recovering from an expensive contest (in this case, to keep Britain in the European Union). The compliance unit itself remains small, so once again people from across the party staff have been dragooned in.

The process this year is pretty much the same: Labour party headquarters doesn’t have any bespoke software to match its voters against a long list of candidates in local elections, compiled last year and added to the list of candidates that stood against Labour in the 2016 local and devolved elections, plus a large backlog of complaints from activists.

It’s that backlog that is behind many of the highest-profile and most controversial examples. Last year, in one complaint that was not upheld, a local member was reported to the Compliance Unit for their failure to attend their local party’s annual barbecue. The mood in Labour, in the country and at Westminster, is significantly more bitter this summer than last and the complaints more personal. Ronnie Draper, the general secretary of the Bfawu, the bakers’ union, one of Corbyn’s biggest supporters in the trade union movement, has been expelled, reported for tweets which included the use of the word “traitors” to refer to Labour opponents of Corbyn.  Jon Will Chambers, former bag carrier to Stella Creasy, and a vocal Corbyn critic on Twitter, has been kicked out for using a “Theresa May” twibbon to indicate his preference for May over Andrea Leadsom, in contravention of the party’s rules.

Both activities breach the letter of the party’s rules although you can (and people will) make good arguments against empowering other people to comb through the social media profiles of their opponents for reasons to dob them in.  (In both cases, I wouldn’t be shocked if both complaints were struck down on appeal)

I would be frankly astonished if Corbyn’s margin of victory – or defeat, as unlikely as that remains in my view – isn’t significantly bigger than the number of people who are barred from voting, which will include supporters of both candidates, as well as a number of duplicates (some people who paid £25 were in fact members before the freeze date, others are affliated trade unionists, and so on). 

What is unarguably more significant, as one party staffer reflected is, “the complaints are nastier now [than last year]”. More and more of the messages to compliance are firmly in what you might call “the barbecue category” – they are obviously groundless and based on personal animosity. That doesn’t feel like the basis of a party that is ready to unite at any level. Publicly and privately, most people are still talking down the chances of a split. It may prove impossible to avoid.

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.