6th May, 2015
Having studied the manifestos I can now say it with some certainty. There is only British political party that is committed to reforming Britain’s broken banking system and still largely out-of-control City of London.
The Green Party.
Other parties such as the Conservatives and the Labour party do mention things like implementing the Sir John Vickers “ringfence” between retail banking and investment banking (a measure first proposed by the Independent Banking Commission in July 2011 and which I believe makes sense as it will prevent “universal” banks from gambling UK depositors’ cash, which is underwritten by national governments, via their investment banking arms) , and imposing relatively soft market-share caps on high street banks.
However none of none of the others goes anywhere near addressing the fundamentals.
So, since none of the other parties is offering any prospect of financial reform, and it is clearly such a pressing need, here is the relevant excerpt of the Green manifesto, which was published on 15 April.
The UK finance industry is a disaster area.
Far from generating genuine wealth, its recklessness and greed created the greatest recession since the 1930s, which in turn contributed to the present regime of austerity and cuts to public services. It has presided over other failures, from the misselling of endowment mortgages and payment protection insurance, to the appallingly low returns and high charges of the state-subsidised private pensions industry, its failure to mobilise long-term finance for renewable energy and its collusion in and creation of a whole industry of tax avoidance and evasion. Meanwhile, those who work in the industry at senior level show no signs of remorse and continue to pocket huge salaries and bonuses. Finance needs root-and-branch reform.
The Green Party would:
• Move towards creating all national currency through a national monetary authority, answerable to Parliament. The power to create money must be taken out of the hands of private banks. Detailed proposals are set out in the ‘Regaining control of our money’ box.
• Separate retail and investment banking. Retail banks should be required to limit their role to taking deposits and making loans that facilitate economic activity; investment banks should take the form of partnerships rather than limited companies.
• Introduce controls on bank lending.
• Act to control payday lenders and offer alternatives (see the ‘Greens in power’ credit union box).
• We will use the government-owned Royal Bank of Scotland to create a network of local banks for every city and region, ensuring that each bank is a People’s Bank, obliged to offer cheap basic banking services.
• Invest £2 billion in a network of community banks, mutually owned and serving local areas or particular groups.
• Expand the role and the funds of the Green Investment Bank by offering green Individual Savings Accounts and pensions, allowing the bank to borrow and boosting the equity in the bank by £9 billion over the Parliament.
• Introduce a Robin Hood tax (a financial transaction tax) to reduce destabilising speculation (see the ‘Taxes’ section below for details).
• Work for the abolition of the City of London Corporation and the special statuses it enjoys.
Greens in power carry out our policies
The Green-led administration in Brighton invested £100,000 in a local credit union, partly to help it set up an online system for residents to access loans, making the credit union as accessible as high-interest payday lenders. It also banned such lenders from advertising on Council billboards. In 2013 Green MP Caroline Lucas worked with East Sussex Credit Union to show ministers how to help credit unions fulfil their potential by, for example, ending the restrictions that put them at a competitive disadvantage when compared with banks.
Regaining control of our money
One of the most fundamental tasks of government is maintenance of the currency. Without stable money accepted by all we can’t buy and sell things or plan for the future. Inflation in particular makes it hard to take the long-term view that the environmental crisis demands.
Most people believe that our money is currently created by the nationalised Bank of England. It isn’t. A pound in your bank account is no more than a promise by the bank to pay you that pound; you don’t actually own any publicly created money. In fact, commercial banks create new money (in the sense of money in bank accounts) whenever they make loans, and that money disappears when the loan is paid back.
The fact that the size of our money supply – the total amount of money in circulation – is dependent upon millions of separate commercial lending decisions by banks makes it hard to maintain economic stability. During the great recession of the past few years, the unwillingness of banks to make new loans and the desire of people to pay down their debts has meant that the money supply has shrunk, and the government has had to resort to the emergency policy of printing money (called ‘quantitative easing’) to prevent an even worse slump.
We believe that the time has come to recognise that the creation of currency and the control of the money supply is far too important to be left to profit-seeking private sector banks and should be brought back under the democratic control of the state. Quantitative easing was but a first step. Commercial banks should be no more than the custodians of publicly created money in current accounts, and the creation of that money should become the function of a new monetary authority, independent of day-today government control. This policy would protect ordinary bank accounts, and
• allow banks to fail safely
• separate ordinary and investment business
• provide some control on overall lending and debt
This would be a massive and complex change to our banking system, with many ramifications, and its implementation, involving many years of consultation, legislation and the creation of transitional arrangements, would not be appropriate for one Parliament. But we would take the first steps of preparing detailed proposals and consulting upon them, and Green MPs will press this issue in the next Parliament. The change to the new system would create a new and substantial cash flow for the government, which could be spent on social and environmental priorities and assist in paying down the national debt.
The Greens’ policies may be sketchy and incomplete, extremely disruptive in the short term (especially the monetary policies), and hard to implement unilaterally (also persuading publicly-listed investment banks, especially those headquartered outside the UK, to reconvert to partnership status might be quite a tall order).
But they are broadly along the right lines, in my view.
And at least they are proposing something.
The silence of most of the other parties on banking and finance has been deafening during this election campaign. The major parties seem perfectly happy for Britain to remain home to the world’s largest virtually unregulated casino, and to continue to give often corrupt banks and financial institutions safe haven, with massive implicit subsidies and free rein to carry on abusing their power. Nor are the large parties taking any credible steps to ensure corporate managements are accountable for criminal behaviour or other malfeasance inside their organisations. Roll on the next crisis!
For good measure here is a video in which the Greens’ candidate for Brighton Pavilion, Caroline Lucas says that politicians have recklessly handed over their power to unelected interests including banks and bankers.
In the interview, which was with the comedian and activist Russell Brand, Lucas said:
“The reasons the bankers have power, or that other unelected people have power is that the politicians have given that power away.
“It’s not like some divine right that these other people [e.g. bankers] have power. Politicians have chosen to give that power away.
“And you know that Transatlantic Trade & Investment Partnership agreement (TTIP)? This is a really wicked agreement that’s going to give even more power to corporations; you’ve got politicians right now negotiating that away saying, ‘yeah go on, set up a separate court system whereby private corporations can take democratically-elected governments to court if they happen to think that one of those laws is a barrier to trade’.
“This isn’t happening just because the companies are bad — although many of them are. It’s happening because politicians are perfectly happy to pass away that power.
“One of the problems is that the bigger international institutions are completely undemocratic — things like the World Bank or even the World Trade Organisation, even the EU … sometimes it’s right to have decisions taken at a European level …. but all the institutions have to democratic and accountable to us the people. That’s what’s missing.”
(In his remarkable film Bitter Lake – released exclusively on BBC iPlayer on 25 January 2015 — filmmaker Adam Curtis said political impotence was a direct consequence of politicians’ decision, since the 1970s, to hand over their power to unelected entities including the financial markets’)