POLITICS

Ed Miliband: It's Time For A Reckoning With The Banks

16/01/2014 22:01 GMT | Updated 25/01/2014 21:01 GMT
Chris Ison/PA Wire
Labour leader Ed Miliband speaks during the first day of Labour's annual party conference in Brighton.

It is time for a "reckoning" with the British financial system Ed Miliband will say on Friday, as he sets out plans to restrict the size of individual banks.

In a major speech in central London, the Labour leader will seek to capitalise on public anger at the City. "Under a Labour government, you will no longer be serving the banks. Instead, the banks will be serving you," he will say.

"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. After decades of banking becoming more and more concentrated, Labour will turn the tide."

Miliband's plan takes inspiration from the American progressive tradition, including Teddy Roosevelt, the Republican president who challenged the power of the US banking industry at the turn of the 20th Century. A senior Labour source said: "We are channeling [Roosevelt] quite heavily here."

Earlier this week it was reported that Labour would set the market share at 25%, which would require the break-up of Royal Bank of Scotland. However Labour sources insisted a precise percentage has yet to be decided.

Aides to Miliband see it as one of his most important speeches yet as it will set out his "long term vision" for the economy. As with his past two conference addresses, he will deliver it without notes.

"We need a reckoning with our banking system, not for retribution, but for reform," he will say. "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."

He will add: "After decades of banking becoming more and more concentrated, Labour will turn the tide."

The Labour leadership hopes to repeat the popularity of Miliband's call for a freeze on energy prices. It is now the banks turn. "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," Miliband will say.

On Thursday afternoon George Osborne sought to deliver his own cost of living policy by announcing he wanted to see an above-inflation rise in the minimum wage - from £6.31 an hour to £7.

Labour was dealt a slight blow on Wednesday after Bank of England governor Mark Carney said he did not back a "crude bonus cap" on pay in banks or proposals to restrict their size.

However Teresa Pearce, a Labour member of the Treasury select committee, told The Huffington Post UK his criticism was to be expected. "It is not surprising that a governor hand-picked by the chancellor, and rewarded with a £874,000 pay package, is not in favour of tackling exorbitant pay and bonuses in the banking sector," she said.