The Liberal Democrats have set out the key pillars of their economic manifesto which include plans to separate banking functions and keep the FSA as the UK’s financial regulator.
At the Demos Politics 2010 series in London on Monday, Shadow Chancellor Vince Cable said: “A modern version of Glass Steagall is required separating retail and investment banking and there is need too for more meaningful competition in business and mortgage lending. Until the banks are broken up and are able to compete and succeed or fail without Government guarantees, they should pay an insurance premium – a supplementary tax on bank profits.”
Cable called for banking regulation to be reformed and improved but does not support Tory calls for the FSA to be axed. He said the FSA has made mistakes but it is not the right time to change the regulator.
He said the banking industry needs more local banks, mutuals including credit unions, a banking arm for the Post Office and specialist banks to support new ventures and infrastructure.
He criticised Labour and Tory plans to ringfence some Government budgets from spending cuts. The LibDems propose tough limits on public sector pay rises, removing higherrate pension tax relief, reform of public sector pensions and cuts in welfare spending such as tax credits for higher-earners and scrapping child trust fund contributions. Cable said an additional £10bn has been identified in net savings beyond what the
Government has put forward.
Cable also detailed a “revenue-neutral” package of tax changes that centre on tax cuts for the low-paid.