The Labour leader, Ed Miliband is to use his platform at the Labour Party conference to promise economic and banking reforms to usher in a new era of “responsible capitalism.
Mr Miliband will try and persuade voters that Labour can be trusted to manage the economy competently and to legislate effectively to protect against further banking scandals.
Mr Miliband will outline how Labour would break up British banks that do not put in a ringfence separating retail banking from riskier investment banking activities. He will also promise that Labour would bring in a tax on banker bonuses.
Mr Miliband told the Guardian newspaper ahead of the Labour Party conference in Manchester that banks must focus on lending to small businesses and move away from investment activities or as Mr Miliband pit it “playing the international money markets.”
Mr Miliband promised that unless certain activities in the banking sector change, the next Labour government will legislate against them.
He said: "Either they can do it themselves - which frankly is not what has happened over the past year - or the next Labour Government will, by law, break up retail and investment banks".
"The banks and the Government can change direction and say they are going to implement the spirit and principle of Vickers to the full. That means the hard ring-fence between retail and investment banking. We need real separation, real culture change. Or we will legislate."
Mr Miliband also promised that Labour will raise the top rate of income tax from 45p to 50p in the pound.
He told the BBC’s Andrew Marr show on Sunday morning that if banks threatened to leave the UK if stricter legislation was introduced, that: "I don't believe that will happen. I think those banks have a commitment to Britain."
"You'll have a Prime Minister who'll stand up to the banks. We're going to have the big long-term reforms that will make a difference. Either they sort it out themselves or the next Labour Government will by law split those banks up."
Sir John Vickers, whose Independent Commission into Banking reported its findings towards the end of last year recommended that the retail and investment sectors of each bank should be separated or “ringfenced” and that is “legally, economically and operationally” separate from investment banking activities.
The coalition government has pledged to undertake this recommendation and to change the law by 2015.
However, the changes will not take effect until 2019. Mr Miliband will say the coalition has “watered down some of the recommendations and call for these changes to be implemented quicker and he will also pledge to introduce other recommendations by Sir John Vickers, that the coalition has ignored such as getting banks to hold higher capital reserves.
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