17 Jan 2014

Miliband vows competition ‘reckoning’ with banks

Labour leader Ed Miliband promises to force banks to give up branches in order to make way for new competitors if Labour wins the next general election.

Ed Miliband vows to increase compeitition by forcing banks to sell branches

The Labour leader will say in a speech later on Friday that a “reckoning” is needed with banks. He will also accuse the industry of having been “an incredibly poor servant of the real economy”.

In his speech at the University of London, Mr Miliband will say: “We need a reckoning with our banking system, not for retribution, but for reform.

“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.”

The Conservative party has moved to take the sting out of Mr Miliband’s argument that the UK is in a “cost of living crisis”.

At prime minister’s questions on Wednesday, David Cameron argued that falling inflation has taken the steam out of Labour’s “cost of living” mantra.

On Thursday evening, the eve of Mr Miliband’s speech, Chancellor George Osborne announced that he was considering an increase of almost 11 per cent in the minimum wage to restore it to pre-recession levels.

But Mr Miliband is warning that if the government thinks the crisis is over, it is being short-sighted.

He will say: “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.”

Read more: FactCheck - bankers' bonuses

Mr Miliband’s critics may point to comments made by Bank of England Governor Mark Carney, who told the Commons treasury committee that “breaking up an institution doesn’t necessarily create or enable a more intensive competitive structure.”

CBI chief policy director Katja Hall said it was “not for politicians to dictate market structures – they must allow competition authorities to do their job”.

And Richard Lloyd, executive director of consumer group Which?, said that while more competition was desperately needed, enforced branch sales was not a “silver bullet”.

“After all, someone has to want to buy them,” he said. “The real priority for the regulators is to use their new powers to make it easier for new challenger banks to give people a genuine choice, make sure the payments system is fit for purpose and make banks release data to help consumers find the right bank for them.”