Labour to set up ‘regional banks’

ED Miliband will today commit Labour to establishing a network of ‘regional banks’ to help finance local firms if his party returns to power at the next election.
Labour party leader Ed MilibandLabour party leader Ed Miliband
Labour party leader Ed Miliband

In a landmark policy announcement, the Labour leader will call for around 20 regional banks to be set up across the UK, each with the sole remit “to serve that region, and that region alone”.

Mr Miliband has been vehement in his criticism of the banking sector since becoming Opposition leader, and has previously outlined proposals for a ‘British Investment Bank’ underwritten by the Treasury to provide finance to UK firms.

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In a speech at the British Chambers of Commerce annual conference today, he will go significantly further with a commitment for the bank to have a network of ‘regional partners’ designed to boost investment locally.

“We don’t just need a single investment bank serving the country,” the Doncaster North MP will say. “We need a regional banking system, serving each and every region of the country.

“Regional banks, with a mission to serve that region and that region alone. Not banks that like to say ‘no’, but banks that know your region and your business. Not banks that you mistrust, but banks you can come to trust.”

Labour sources said the party has not yet decided on the precise structure of the new banks, but that they would be likely to operate along the lines of the Sparkassen model in Germany.

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The regional banks would be commercial but non-profit-making entities, akin to charities or trusts, the party said, with high-profile local figures on their boards and strong links to their local communities.

“It’s about a different kind of bank,” a source said. “Ed wants us to return to locally-based banks that know their local areas.

“We’ve seen in recent weeks how despite all these Government initiatives, net lending fell by £4.5bn in the last quarter. Money is still not getting to businesses.

“There are many businesses which have excellent business plans and can show they can repay the money, who send off a loan application – and someone in Canary Wharf just says ‘no’.”

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Labour promised at the start of the year that it would start to set out more detailed policies for its 2015 election manifesto over the coming months.

Mr Miliband’s pledge today follows a policy-heavy speech on immigration by Shadow Home Secretary Yvette Cooper last week.

“I am committed to turning this idea into reality during the next government,” Mr Miliband will say. “I am determined One Nation Labour becomes the party of the small business.”

Yesterday, however, Mr Miliband had his sights trained firmly on the Prime Minister as he claimed the Government was “falling apart” amid reports of splits in the Cabinet and senior ministers lining themselves up to replace David Cameron.

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Speaking at Prime Minister’s Questions, the Labour leader claimed members of the Cabinet had “lost confidence” in the austerity policies pursued by Mr Cameron.

But Mr Cameron in turn accused the Labour leader of failing to address the key issues of the economy and welfare reform, and claimed he allows the union bosses who support his party financially to determine its policies.

The clash came after widespread reports that Education Secretary Michael Gove admonished Home Secretary Theresa May at a meeting of Conservative Cabinet members, for allowing rumours to rise up about her leadership ambitions.

Mrs May fuelled speculation she is positioning herself for a post-Cameron era over the weekend by delivering a speech that ranged far beyond her home affairs brief.