Unions want to see state investment bank, greater diversity and a crackdown

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The TUC is set to call for a major shake-up of the UK banking sector.

At Congress next week the TUC General Council will put a statement calling for a state investment bank, with consideration of a fully nationalised RBS as its launch pad; a real Green Investment bank with powers to borrow; greater diversity in the banking system, a crackdown on bonuses and treating high pay and bonuses as profits and thus subject to corporation tax.

TUC general secretary Brendan Barber said: “Banks caused the crash. Their problems are still driving the Eurozone crisis. They are still failing to provide the finance that Britain’s productive sectors need.

“Yet the government is still tiptoeing round reform. Even the limited Vickers proposals are being watered down, and initiatives designed to kick-start lending or boost growth end up helping banks, rather than the real economy.

“That is why it is not just unions backing a radical shake-up. Proposals we make also find support among business leaders, consumer groups and even some ministers.”

Proposals include:

  • A state investment bank, able to issue bonds, to offer long term finance to industry, small business and infrastructure projects. RBS should be used as a quasi-state investment bank until a new bank is established, if necessary buying up the remaining 15 per cent still privately owned to give the bank a new long term mandate.
  • Turning the government’s planned Green Investment Bank into a proper bank able to raise its own funds and invest in tackling climate change.
  • Increasing diversity within the sector by boosting mutuals and credit unions, and by reducing the ‘too big to fail’ problem. Measure could include a graduated banking levy, toughest on the big banks who receive the biggest share of what the Bank of England estimate is a £100 billion public subsidy for borrowing costs.
  • Changes to the Companies Act to make the prime purpose of directors the promotion of the long-term interests of the company. All non executive director posts should be advertised.
  • Worker representation on remuneration committees and an end to the culture of bonus entitlement. The General Council statement says that “there is ample evidence that performance-related pay has not been effective in rewarding good performance. There is also convincing academic evidence that performance-related pay does not generate higher levels of motivation or better outcomes – on the contrary it can contribute to excessive risk taking. Banking remuneration needs to move away from this damaging model of distributing rewards, but where bonuses do exist, they should be subject to ‘claw-back’ if trades or deals turn bad.”
  • Pay and bonuses above £250,000 should be considered to come from profits and therefore subject to corporation tax. A Financial Transactions Tax (also known as a Robin Hood tax) should be introduced.
  • More resources and powers for regulators and the Serious Fraud Office to police abuses.
  • Regional small business banks.
  • A new independent commission on banking including representatives of small businesses, mortgage payers, employers and unions.

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