This morning the Liberal Democrats overwhelmingly voted in favour of taking tougher action on banks an bonuses. In a highly topical debate delegates applauded proposals put forward by the Social Liberal Forum to, amongst other things:
• break up banks ‘too big to fail’ into smaller, safer entities
• ensure that in State-owned banks, pay packages larger than that of the Prime Minister are fully disclosed
• split high-risk banking away from ordinary high-street banking, with no State guarantee for the former
• take measures to tackle financial exclusion for the vulnerable.
Naomi Smith, summing up the debate, said:
“Adam Smith said that when businessmen get together it is to act against the public interest – the British Bankers Association affords a classic example of this. We can no longer tolerate the position where profit is privatised and losses nationalised.”
The final agreed motion is on the Party website.
Here is the text of the opening speech given by Prateek Buch when he proposed the motion:
Friends, let me begin with an apology and an acknowledgement.
The apology is for not being Lord Oakeshott – I’m sure you’d have preferred to hear from him but as Matthew can’t be in Sheffield today for family reasons, I get to move the motion we wrote together.
The acknowledgement is for Stephen Willams MP whose motion we may well have been debating now instead of this one – I’d like to say that Stephen’s proposals, not least his scheme to distribute a stake in the State-owned banks to every citizen, deserve to be fully debated and endorsed by Conference and I look forward to doing so soon.
On to our Motion then, which calls for tougher action on banks and bonuses.
It may be fair to say that this Coalition Government – our Coalition Government, has done more to address the deepseated malaise at the heart of our banking system in less than 12 months than the previous administration did in twelve years and more.
With the institution of the Vickers Commission and the Project Merlin agreement between the leading UK banks, we’ve finally begun to reverse decades of under-regulation of the financial services sector.
But let’s be clear on two things. This government could hardly do worse than its predecessors; the previous Labour government – and the Tories before them – were directly complicit in the creation of an unsustainable banking boom that went bust so spectacularly that we’ll be picking up the pieces for decades.
And although I said we’d started down the road to a better banking future, a start is all we’ve made – the aims of Project Merlin were certainly laudadble, but it’s language simply doesn’t go far enough.
It’s easy to see just how far we’ve yet to travel; the continued payment of exorbitant bonuses at taxpayer-subsidised banks – even those that continue to report heavy losses, demonstrates that Merlin was wrong to still depend upon voluntary restraint on pay and bonuses – that really is as likely as pigs soaring above Canary Wharf.
This is why we call for pay transparency requirements to be extended so that we can see just how distorted executive – and non-executive – pay has become. But I wanted this Motion to go beyond tackling manifestly unjust remuneration, because even the toughest action on this risks leaving the underlying structure of banks as it is – a dangerous game to play.
This is why we call for policies such as the separation of high-risk casino-style banking from the vital utility function of ordinary high-street services. Or, the break-up of banks ‘too big to fail’ into smaller, safer entities.
Or even the requirement for large banks to hold greater capital reserves and to make living wills – now on this, I am aware that we need international agreement but let’s not hide behind that as an excuse, let’s lead from the front in calling for banks to be put on a more solid footing than they are today.
The Motion also proposes that the Green Investment Bank be just that – a fully functioning bank and not just a fund, as well as calling for measures that tackle financial exclusion for the vulnerable. The former, that Chris Huhne and Nick Clegg have argued for in the face of some resistance, is vital if we are to design a greener, more sustainable economy than we currently have.
The latter, for me at least, is why Liberal Democrats are needed in government – to stop the obscene iniquities that arise from the poor being charged to withdraw their own money from an ATM, whilst in the next street the millionaire banker rakes in the profit. In an age of public austerity it just isn’t right, we can’t tolerate banks perpetuating financial exclusion and we must help put an end to it in all forms.
And that, ultimately, is what this Motion is about – restoring banking to its rightful place as a service investing in a vibrant, diverse economy, not a sectional interest holding the rest of us to ransom for the sake of short term gain – and that too for the select few.
It’s about bringing rewards in the industry in line with performance and about preventing spillover from future financial crises into the wider economy.
You may as why I, or the Social Liberal Forum and its supporters who signed this Motion, think it’s fair game to intervene in the banking market – that’s not what liberals believe in, is it? I’ll draw my remarks to a close by addressing that question.
As far as I’m concerned, freedom and liberty are what matter – but not that of the banks, that of the people – and people aren’t free to live the lives they have reason to value if unaccountable corporations charge what they want, pay themselves what they want and keep for themselves the means for others to live fulfilling lives.
People aren’t free to pursue their goals as citizens free from the fear of financial collapse if they’re forever liable to bail out reckless banks to the tune of hundreds of billions of pounds.
And ultimately, it’s with policies like these, unashamedly harking back to the Bretton Woods days of a banking system tamed to serve the people, that we can ensure that banks are never again in a position to poison our vision of the Good Society, that they help us instead realise our vision of a fairer, more sustainable economy – with that I urge you to support the Motion and help keep Lib Dems at the forefront of taking tougher action on banks and bonuses