“I have complete confidence in Ed Miliband as leader of the Labour Party”
Ed Balls has emerged from a week’s radio and Twitter silence to give an interview on BBC Radio 4 The World At One. Here is a transcript. He was asked about Ed Miliband’s speech this morning, in which the Labour leader promised to increase competition in the banking industry.
Shaun Ley: It’s something you pledged to back in the autumn of 2012, how has the idea evolved in the intervening year and a quarter?
Ed Balls: Well, of course we’ve been in opposition since 2012 and therefore the implementation challenge that Peter [Levene] lays down is really a question for the government. I, in 2011, when the Vickers Commission highlighted the lack of competition in our banking industry, I said to the Chancellor, George Osborne, he should refer that to the competition authorities straight away, have a review and take action to get the kind of radical change and competition that Christine [Farnish, chair of Peer-to-Peer Finance Association] was calling for a moment ago. Nothing has happened; we’re not satisfied with the status quo. Banks play a really important role in our economy, but we need more competition and more choice to do a better job for consumers and small businesses and it’s not going to happen from this government so the next Labour Government will start from day one.
SL: OK, fine. So, just be clear, this is basically a restatement of the policy you had before. But, I wonder if the concentration…
EB: Since then…
SL: Well, that’s what you’ve just said, but I wonder if concentration is really the issue you’re concerned about. The British Banking Association point out, for example, the last time the European Central Bank looked at the European market it said, actually, we were way below the EU average on this, we were about 23 out of 27 EU countries as it then was, in terms of the concentration of the market being in such few hands.
EB: We have four banks who control 75 per cent of personal current accounts for ordinary people and four banks controlling 85 per cent of small business lending. Both the Parliamentary Commission – since Ed’s speech in 2011 – and the Vickers Commission have both highlighted the lack of competition in our banking system and there have been attempts to have more competition in the last few years and they’ve failed. What the next Labour Government is saying is we’re going to act. Now, I’m not saying to you that having more banks and having more competition, in and of itself, solves the problem because there are also issues of culture within the banks themselves and there’s clear evidence the banks are rising to the plate on; there’s the issue of pay and accountability; there’s the issue of proper regulation, and we’ve challenged the government to go further, but competition is an important part of this. Labour is saying we want more competition in banking.
SL: But do you accept – you’re saying you want it, you’re not then saying necessarily how it’s going to be achieved – but do you accept that one of the causes of, if you like, the uncertainty you’re creating now over this is that it might make it that much harder to sell off RBS and get a good price for it?
EB: Well, look, I understand…
SL: Because nobody knows whether or not it will have to be reduced in size at some point in the future.
EB: I understand the business argument which says that any proposal for change is destabilising and causes uncertainty, but we need change in this market, we need radical change. There have been changes since 2010, they’ve not gone far enough and we’ve said, not that we’re simply going to think about this, Shaun, on day one we will act with the review, a report within six months, we’ll legislate powers for the competition authority if we need that to impose the caps. We want to see the divestment happening within one parliament. We want to see within five years of the next Labour Government genuine competition in this market. I think it’s good for banking in our country to have competition but it’s, importantly, good for consumers and businesses too.
SL: How do you avoid the problem though – it’s one that Robert Peston says has been raised by bankers in conversations with him – how do you avoid the problem that a consequence of a cap could be that banks divest themselves, really, of what they regard as low quality, or loss making, customers which could be your average Joe Bloggs in the street who just has an ordinary current account which isn’t actually making any money for that bank?
EB: Well, look, the government is in charge of the legislative and regulatory regimes…
SL: Yes, but we’re talking about a Labour Government – what it would do. What would you do?
EB: I’m saying that governments are in charge and we will legislate to make sure the Competition and Market Authority and the regulators have got the powers they need, including to make sure that bank services are available in every community. Now, it’s not surprising to me that there will be some people from some banks telling the BBC’s Economics Editor that they don’t want change, but I have to say, I think that makes it more important that we get the change that we need for our economy, for businesses and for consumers.
SL: Let’s leave the bankers aside then. What about the Governor of the Bank of England, he suggested in his evidence to the Treasury Select Committee earlier in the week that the cap on retail bank market share in the US – which Ed Miliband has described as a good model – in part may have fuelled the financial crisis, because it limited the ability of banks to makes profits and therefore that encouraged them to move into wholesale funding.
EB: Well, look I know Mark Carney very well, I’ve known him for many years, I spoke to him yesterday. I don’t think for a moment he’s suggesting that the thing which caused the sub-prime banking crisis, all that irresponsible lending to home owners in southern America, was too much competition and too much diversity in the US banking system. There was a massive regulatory failure in America and in Britain too, and we need tougher regulation. I think we want more competition…
SL: Makes an awkward relationship for you though, doesn’t it, if he’s effectively saying, as he also said, just breaking up an institution doesn’t necessarily create a more intensive competitive structure? I mean, he is hinting that he is a sceptic about your policy, and if the Governor is at odds with a key plank of Labour economic policy it’s going to make for a very unhappy relationship if you become Chancellor and Ed Miliband becomes Prime Minister isn’t it?
EB: Look, as I said I’ve known Mark Carney for a decade and there’s no prospect of an unhappy relationship…
SL: Did you tell him to shut up when you spoke to him yesterday?
EB: Absolutely not, of course not. On the issue which he raised on Wednesday of bank bonuses, and our view that pay and bonuses where the bonuses are more than 100% higher than salary, he disagreed with that. On that one, I’m going to disagree with the Governor of the Bank of England, I don’t think that is the right approach for bankers’ pay. On the issue that he raised on competition where he said imposing a cap – and he hadn’t seen our speeches at that time – imposing a cap would not in and of itself solve the problem. Well, of course he’s right on that, that is why this is part of a package of reforms and why we’re not simply imposing a cap, we’re asking the Competition and Markets Authority to investigate this immediately under the next Labour Government. This is a responsible approach; we’ll discuss it in detail with the Governor of the Bank of England and the competition authorities. I think the one thing you can say at the end of this conversation is there has been very little change in the last few years but there will be big change under the next Labour Government and that’s a good thing for our economy.
SL: How is your relationship with Ed Miliband now, he didn’t name check you at all in the speech, I know you were at a different event so you weren’t able to be at it. But before Christmas his advisers were openly discussing with journalists whether you were the right man for the Shadow Chancellor’s job and I wonder how things had evolved since then?
EB: I have a very good relationship with Ed Miliband. We discussed the speech in detail for a number of weeks, and the speech I’m making as part of the series next Saturday. If you could find the journalist who had that conversation, let me have a word with them. I’d be very surprised if that conversation happened with you. These things tend to be unsourced comments supposedly made to a journalist, and if you’re a grown-up in politics, Shaun, then you don’t take that sort of tittle-tattle seriously.
SL: It’s a statement of fact though, isn’t it that you were not his first choice for the job, because that was Alan Johnson, then obviously he resigned and you were in it. So, obviously it is important for the public to know about the degree of confidence he has in you and you in he.
EB: I have complete confidence in Ed Miliband as Leader of the Labour Party and I am Ed Miliband’s Shadow Chancellor and I’m the person who’s going to make sure that we have sound public finances, but also have fairness in our labour market, fairness in our tax system, preserve our NHS, and have competition in banking in our economy to tackle the cost-of-living crisis. Everyday I’m going to work hard to do my job for the benefit, not of the Labour Party, but for the British people and I’m going to work closely with Ed Miliband, in the next year, as I have for the last three years, to make sure that we win the next election, because that’s the most important thing for me.Tagged in: ed balls
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