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Nick Clegg: It's time for a truly different banking system
BRITAIN'S banks have been allowed to get away with far too much over the last decade. It's time to draw a line under the age of reckless banking and begin a new era that keeps high street savers' money safe and keeps the financial lifeblood of our economy flowing so businesses can grow and thrive. Never again must our economy be brought to its knees by the actions of a greedy few in the City of London.
This week, Lord Turner, the new chairman of the Financial Services Authority, has made a lot of sensible suggestions about how we reform the banking industry. It's a travesty that it has taken a crisis of this scale to bring common sense back to banking regulation. Nonetheless, I welcome his report.
It is better late than never, and I can only urge the Government to press ahead with implementing his recommendations without watering them down. Both the Government and the Conservatives have cosied up to their friends in the banks for decades. They must both stop, and start thinking about ordinary people's needs instead of what bankers want.
But Lord Turner's report doesn't go far enough. I want a return to old-style high street banks so people's savings are protected from bankers who are obsessed with taking high risk gambles with other people's money. I propose that banks are given a choice: they can do ordinary consumer business like current accounts, mortgages, business loans, savings, they can even make sensible low-risk investments and we will protect them and their customers' money if things go wrong, but in return, we will regulate them like a hawk.
The alternative that some banks may prefer is to take the high-risk route, playing the markets to get big returns. But if they do this we will regulate them and keep them small so that they can't put whole markets at risk. If things go wrong, we would let them fail.
For those banks which choose the first option – plain vanilla banking – we need a totally different culture of pay. These simple banks are going to be like utilities, closely regulated and unexciting, so there should be no more cash bonuses for these bank bosses at all.
We also need to bring an end to the culture of tax avoidance that the Government has turned a blind eye to for so long. There have been some shocking allegations about Barclays Bank's tax avoidance schemes this week, thanks to whistleblowers contacting my colleague Vince Cable.
But it isn't just Barclays by any means. Britain has an extremely unfair tax system that makes it easy for big business and wealthy individuals to use loopholes and exemptions to get out of paying billions of pounds every year. Even the banks that we have effectively nationalised – Lloyds Banking Group, which incorporates Halifax and Bank of Scotland, and the Royal Bank of Scotland – have got involved in these sort of measures and the Government crazily didn't make it a condition of the bailouts that they stop doing it.
That's a scandal. All that the Government has done is promise to create a "voluntary code" on tax avoidance. They're basically just asking the banks nicely to pay their taxes in full. But we own these banks: why aren't we just instructing them to pay every penny of what they owe?
It looks like the Government may take some of Barclays' bad debts off its hands with the asset insurance scheme they have developed. But I believe taxpayers shouldn't take on a penny of liability unless – and until – the bank comes clean and closes down all its tax avoidance operations.
Finally, let's face it, if anyone's ever going to trust Britain's banks again, those responsible for this crisis need to be brought to account. They may not be criminals, but they failed. The companies they ran had to crawl to the taxpayer for a multi-billion pound bailout, and in my book that's failure. But what's staggering is that none of them have been held to account for what they did.
When Barings Bank went belly-up in 1995, the Government banned 10 directors from working in any other boardroom. This time, when the whole banking system has been torn to pieces, not one person has been disqualified.
No wonder people have lost faith in a banking system in which the most basic standards of accountability have been forgotten. I believe we should disqualify these bankers right now, and have launched a petition at www.disqualifythem.org to get the Government to do it.
For decades, governments both red and blue have only thought about what banks want, not what people need from the banks. That's got to change. It's time for a truly different banking system, which only the Liberal Democrats have a clear plan to create.
Nick Clegg is the Sheffield Hallam MP and leader of the Liberal Democrats.
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Saturday 26 May 2012
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