Labour leader Ed Miliband has pledged to go further than the Government’s banking reforms by breaking up Britain’s banks if Sir John Vickers’ recommendations are not implemented in full.
Speaking to the Observer yesterday as the Labour party gathers in Manchester for its autumn conference, Miliband said he wanted to ensure high-street retail banks are not attached to “casino operation” investment arms.
He said: “I’m saying very, very clearly – there’s two things that can happen. The banks can change direction and say we’re going to implement the spirit and principle of Sir John Vickers’ Independent Commission on Banking proposals to the full, which means the hard ringfence between retail and investment banking.
“Either they do that or I’m giving a very, very clear message which is that the next Labour government will just by law break up retail investment banks. You’d do what they call Glass Steagall.”
Glass Steagall is a former American law dating to the 1930s that split retail and investment banks to stop the mixing of risky investments with people’s savings and current accounts.
Miliband said: “It is a drastic step doing Glass Steagall. I want to get the culture change whatever way I can get it. If it can be done in another way, I’ll do it.”
He said such a split would give more confidence to consumers that they were being sold simple, comprehensible products without banks “playing the international money markets”.
In its submission to the Parliamentary Commission on Banking Standards the Investment Management Association said some fund managers now favoured a total split to make banks safer investments. There has been concern the Government’s banking reform proposals watered down some of Vickers’ recommendations.
At the suggestion that banks may leave Britain if they were forced to break-up, Miliband said: “For too long governments have succumbed to those kind of arguments and we haven’t done the right thing for the country.”
Speaking on the BBC Andrew Marr Show yesterday Miliband also said he would reverse the cut to the top rate of income tax from 50p to 45p if he were in power now. He also proposed taxing bankers’ bonuses to raise £2bn to spend on schemes to help the unemployed and housing.