A year ago, Ed Miliband set out his vision of Responsible Capitalism, saying Labour was “determined to stand up against the vested interests that are imposing a surcharge culture on people”.
He specifically targeted the bonus culture in the banking sector. This in contrast to the Conservative-led UK government which has both failed to rein in the excesses of the City of London and learn any real lessons from the past.
The recklessness of the financial sector that led to the 2008 crash was fuelled by the promise of bonuses of several multiples of annual salaries for traders.
Meanwhile, in the real world, the crash has led to a continuous credit crunch for the real economy ever since, despite the fact that there are €27 trillion assets under management in the EU looking for viable investment opportunities.
Over the last week, much has been made in the UK of the EU deal brokered by MEPs to cap bankers’ bonuses, and Cameron and Clegg’s opposition to it.
The rules, which would limit bankers’ bonuses to the equivalent of their salary, or two times their salary if shareholders agree to it, are set to be introduced next year and would represent the toughest bonus regime anywhere in the world.
On Tuesday, it became clear that the UK was isolated in its opposition, with George Osborne the only European finance minister to oppose the rules.
Many people in my home region, the North East of England, as well as across Europe, remain staggered at the size of bankers’ bonuses given the destruction they caused and the growing hardship experienced by ordinary people from austerity.
Public anger was clear last weekend when Swiss voters approved measures to curb executives’ pay and outlaw golden parachutes that can at times result on directors pocketing multimillion-pound payoffs.
MEPs have shown leadership in taking on the bankers to try and address some of the root causes of the financial crisis. It should be recognised that Labour MEPs help push this change against heavy lobbying from the banking sector and their allies in the UK government. All credit to them.
However, I’m struck that stronger shareholder powers and limits on bonuses are only elements in the regulatory shift needed to develop the ‘responsible capitalism’ Ed Miliband set out a year ago.
It is when we combine new regulation of the banking sector with the proposed Financial Transaction Tax (FTT), published on Valentine’s Day this year covering 11 EU member states, that we can start to put together a coherent agenda to rebalance our economies – promoting a healthy banking sector which channels resources to the real economy rather than speculation.
In the past few weeks in Germany, the German trade union movement (DGB) has developed the idea of a new Marshall Plan for Europe.
Using the revenue from a FTT and national wealth taxes as equity for a public investment bank – not dissimilar to the British Investment Bank proposed by Labour’s Policy Review – the DGB propose to use this equity to raise capital in the markets, creating an investment pool adequate to reboot the economy through active infrastructure and industrial policies, energy efficiency and greening, creating jobs and security for those in work.
Imagine the potential for such investments if Labour were to back the inclusion of the UK in the EU’s FTT proposals? It would create the capital needed to develop strong regional industrial policies and modernise the economy.
It is this kind of joined up thinking that we urgently need to build a credible alternative to austerity.