View more on these topics

LibDems pledge to break up the banks

The Liberal Democrats plan to break up UK banks and hit them with a levy of 10 per cent on all profits.

In a press conference this morning Liberal Democrat leader Nick Clegg, who is enjoying a huge surge in the polls, said: “At the heart of our plans for economic change is a simple insight: we need to devolve and disperse economic power, particularly in the banking sector.

“We will create a totally different financial system; a completely different ecology of banking. And for the banks: fundamental change. We will break them up and break them down.”

The LibDem’s are still riding high in the polls with the latest Guardian/ICM poll putting them on 30 per cent, three per cent behind the Conservative Party on 33 per cent and two per cent ahead of Labour on 28 per cent. It is the first time Labour has been beaten into third place since the Guardian/ICM poll began in 1984.

The LibDem banking levy would supplement corporation tax but would be payable on 10 per cent of all the year’s profits without the deduction of previous year’s losses.

The party, which has taken the lead in some polls this week, also set out plans to set new, non-negotiable lending targets for both Lloyds Banking Group and RBS. It warns that if these targets are not met, bank chiefs will be dismissed.

Clegg also set out plans to remutualise Northern Rock and will split the Post Office from a newly trust-based Royal Mail. It will also mandate a new mutual bill and create a minister for mutuals.

It would also create Local Enterprise Funds – tax-efficient investment vehicles that will invest in small start-up businesses.

Clegg said: “Most people, except perhaps Gordon Brown, now recognise that too much centralisation in politics has led to wasteful bureaucratic public services and a command-and-control state that leeches power away from people.

“I believe the same analysis can be made of our economy. Power has been too concentrated in a few super-banks and accessing equity investment, so you don’t have to rely on loans to grow your business, can be almost impossible. We will create a totally different financial system.”


News and expert analysis straight to your inbox

Sign up


There are 15 comments at the moment, we would love to hear your opinion too.

  1. Ok, so Clegg wants to break up the banks. But what about all of the people that have gone through all of the changes of merging companies together and those ones that lost jobs?! Surely that will happen ALL over again!!

  2. What can politicians do now that the state controls eveything through quangos, regulators who do things we expect the elected executive to do?

    We are governed by the public sector machine which is sucking the economy dry, a bit like Matrix?

  3. Anyone who actually understands Banking knows that setting lending targets increases risk, not decreases it leading to greater losses. The increase in risk will be priced in, costing more to small businesses and the person in the street.

    Also Banks do not pay taxes, their shareholders and customers do. As their dividends form an important part of people’s pensions, either through plans or holding shares direct, this is another pensions’ grab reducing peoples’ standard of living. Retirees having their income directly reduced and those still working, having to increase their contributions. Potentially it will then lead to a reduction in the share value now grabbing peoples’ capital as well their income. This is a Lib Dem theft package relying on most peoples’ lack of knowledge of the subject.

    Finally every one knows, except politicians, that in a mature market, and Banking is mature, the most successful is the lowest cost provider (eg HSBC) Breaking up the industry will lead to greater cost and guess who will pay, the very people that the Lib Dems purport to be helping.

  4. Do we not think that the large banking groups will cease their UK operations and take the expertise (the City) and a major part of this country’s income abroad. How about we stop bank bashing, to please the ignorant and improve regulation and oversight? Am I the only one who is fed up of this sensationalist rubbish?? Grrrrrrrr

  5. Perhaps its about time those in charge of banking decisions got the boot. As far as targets go, perhaps if llods stopped taking agencies off Brokers fotr no reason whatsoever then targets would be more acheivable

  6. So for discussion:
    How would splitting up the current banks really help? Surely reducing their size and capital would reduce their credit ratings and capital adequacy and thus make borrowing and lending more expensive for them- a cost which would be passed down to the borrower?
    And as for the 10% tax on banks, this seems oddly abitrary? Why not car show-rooms and other businesses who were helped? Tarring all banks with the ‘big bad wolf’ brush seems a bit of a vote grabber.
    Is he saying they priced the assets/bonds/gilts grossely incorrectly and failed to price in the future benefit when establishing the value? If you’re trying to get a return on the bail-out cash, can you charge interest on any part of it so only those who benefitted are penalised?

    (Without prejudice or polictical bias this comment is purely the writer’s own and not the employer’s.)

  7. Clegg claims to offer a third way – He’s just another socialist. Once more the British public are suckers for the high moral ground. Reality soon dawns when we’re deeper in debt and the business leaders who can bring growth are forced abroad. Be competitive, reward enterprise and those prepared to work hard for it, encourage growth through honest endeavour. Robbing the rich and joining the revolution is fairy tale economics with no basis in common sense and the history books are full of it’s failures. The proper world banking regulations were in place pre Bush/Brown, just put them back and get on with what we do best.

  8. You refer to the “Proper world banking regulations” but usuary hasn’t been working for a big percentage of the population for years.

    There is no law that says you have to work your whole life to buy a house. Thats why we invented machines. Now its just artificial scarcity.

    Mortgages artificially inflate the value fo houses, which in turn make everyone work 4 times as long to own one. Goodbye your life.

    If you could own your own modest home at 28, we wouldn’t have to do crap jobs we hate till we’re 65 and pretend we “Love what we do” while missing our children growing up, and growing ever distant from our partners, and generally missing out on “life”.

  9. You can’t possibly split up the banks now when so many systems and products have been stripped out to make way for new, joined up working. A year ago this may have been feasible. Now, it’s completely ludicrous and will cause the collapse of both merging companies.

    This is a vote swinger for me. It’s about time Mr Clegg became a bit clearer if he’s to win my vote

  10. Seems the response to this news is often contradictory. If quangos ie FSA are to be ended then there will obviously be costs in finding a fairer alternative.
    Does anyone currently believe banks look to benefit customers as a priority, I don’t. Despite a minimum base rate lenders have increase their margins and government seems powerless to do anything about it.
    I do not believe nationalising banks is an option but more choice and competition is urgently necessary.
    Reducing red tape and costs by separating investment banking seems a logical goal.
    Failing to fix a problem for the sole reason of cost is madness, as is sponsoring a quango which has no obvious direction, (FSA requiring a spin doctor.)
    If simplicity is likely to be most cost effective way forward the FSA should simply not regulate products which are difficult to understand. Product providers can then offer non-regulated contracts which the product providers are responsible for.
    Makes simple banking and lending easier to cost and can be paid for by those who use it. Break up the banks for sure, with current ideologies they have failed everyone they are supposed to support.

  11. Mr J Munderstanding 20th April 2010 at 3:18 pm

    I think they should make some super bank rahter than break it up. more control

  12. the best thing that the lib dems could do is dismantle the other 2 main parties,

  13. Yes I like it. The banks are too big. Why not break up Tesco, TNT, Smith KB, ASDA, and the Whole Civil Service. Anything too big surely must be bad!! We want smaller companies employing more people, competeing against each other like the good old days!! Not sure it is possible now though.

  14. Isn’t it amazing how things change. It only seems like yesterday that the whole debate was about Mutuals days being numbered and that ‘Carpet Baggers’ ruled the day, with the great British public voting for the greed route and for de-mutualising of the Building Societies etc, which how we have the Halifax, BBB, Northern Rock and so on.

    Seems to me that the public must one day pay for their mistakes and we cannot keep ‘bailing’ them out by interfearing in the banking system. Most of these banks are in existence because the members voted for it because they were interested in the quick return rather than the long term view. This attitude has long been the case in particular during the Thatcher years. We cannot keep avoiding the price for greed.

  15. The Banks will simply screw their customers to pay for the 10% profit tax!

    On more sinister note this 10% tax law will be the ‘foot in door’ and gradually extended to all and every business sector!

    We’ve become acustomed to this type of ‘foot in the door’ type tactic over the past decade of Labour!

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm