It’s a great pleasure to be here at the Fabians.
I am looking forward to our conversation.
But before that I want to say a few words about this moment.
For too long, we have had an economy that works for a few at the top
but not for most working people.
And after the dramatic revelations of the last couple of days nobody
can be in any doubt about the scale of the problem.
Let’s remember first why the scandals at the banks matter.
It’s about the family struggling to make ends meet and pay their
And finding it harder because someone in the City is cheating and
fiddling the system and celebrating with a bottle of Bollinger.
It’s about the small business, unable to keep their head above water
because they’ve been ripped off with insurance products they don’t
It’s people like them that have been losing out.
We hear their stories.
We now know who some of the victims are.
But we still don’t know who the perpetrators are.
The Financial Services Authority has not even been able to find out
who knew what and when.
Nobody seems to pay the price.
Nobody seems to take responsibility.
And nobody even comes out and explains.
The leadership of Barclays goes to ground.
And British banks which depend on their reputation for straight
dealing get dragged further into the mire.
Casting a stain on the vast majority of honest people with integrity
who work in financial services.
Our economy desperately needs banks that serve the people of Britain
Ever since the financial crisis, people have talked about change but
things don’t seem to be changing.
So month after month, we see crisis, scandal and failure in our
If we do not use this moment act, we will be back in this position
again and again.
The Scale of the Problem
The banking scandals are just the latest example of what I talked
about in my Labour Party Conference Speech last year.
Fast buck, predatory business practice.
Back then, people asked what I meant.
I think the last few days have shown them what I meant.
We need to answer why this has happened.
Today in the case of banking.
The easy thing in this debate is simply to say this is the fault of a
few junior traders.
Just rogue individuals in our banks, who were bad people, looking
I think we’ve heard this before.
One rogue reporter.
Exactly what Rupert Murdoch’s News International said about phone
It is as absurd to believe that one rogue reporter was responsible
for phone-hacking on a grand scale as to believe what we have seen in
our banks is just the responsibility of a few bad bankers.
A trader asks a colleague to fraudulently fiddle the figures, saying
if not “I’m a dead man”.
And when the fraud occurs says “Dude I owe you big time!
Come over one day after work and I’m opening a bottle of Bollinger”
Do we really believe this is about one rogue trader?
How can we believe this when we have so many other examples of
The financial crisis caused by sub-prime mortgages.
The £7bn payment protection insurance scandal.
This week’s revelations of Interest rate fiddling.
Followed by mis-selling to thousands of small businesses around the
Some going bankrupt because the banks, the people who are supposed to
serve them have instead betrayed them.
And add to that the incompetence which meant millions of customers
were not able to pay their bills because they were locked out of
their bank accounts.
And who knows what else is still to come?
This is not just about a few bad apples.
Something is very wrong in a very significant way.
There is another explanation, which says it is simply the fault of a
few bad people at the top of our banks.
I don’t believe that the current leadership at Barclays can lead it
through the current crisis.
They presided over a culture in which this behaviour happened.
Even if they were ignorant, that is not a good enough excuse.
Either they did know what was going on, in which case they are
Or they didn’t know what was going on, in which case they were
But this is about more than a few individuals at the top of the
It is about a system.
A way of doing things.
There have been century long traditions of British banking:
investment in our industries.
But what we see too often in our banks now is the opposite:
Short-term fast buck behaviour.
Take the risks and damn the consequences.
These are companies that are part of every high street in Britain.
British institutions— RBS Natwest, Barclays, Lloyds/TSB.
Everybody from the saver to the mortgage holder to the small business
depends on these names.
They used to expect their behaviour to reflect responsibility,
probity and trust.
But in twenty years the word “banker” has gone from a compliment
implying honesty and sobriety to an insult meaning recklessness and
Banks have become disconnected from the economy and society they were
founded to serve.
And the banking industry itself?
They keep telling us that everything has been sorted out.
Then the next scandal comes along.
We see the same faces coming on to the television.
Telling us reform is going to happen.
They never say what.
They never say when.
They never inspire confidence.
And what lies at the root of all these failures- of short-termism, of
irresponsibility and the failure to own up?
It is about a failure of rules, practices and culture.
A set of institutions that went from being servants of the real
economy to too often being servants
A system gone wrong.
What needs to be done
So what needs to be done?
We have had the Vickers report on banking.
We have had an FSA report into the failure of regulation at RBS.
And, of course, there was a failure of regulation.
Responsibility lies with regulators and politicians in every country.
Including in Britain.
Some of this dates back to decisions in the 1980s and the “big bang”.
A view that free markets, deregulation was the answer.
But we didn’t do enough to challenge that view.
As Ed Balls has rightly said, the last Labour government got bank
Just as regulators and central banks around the world got it wrong.
Just as George Osborne and David Cameron were wrong to be saying that
our regulation was too tough.
So there needs to be some humility from all politicians: nobody got
it right in the past.
All parties bought into a model of regulation which didn’t work.
Some more than others.
But the real question is who can learn the right lessons for the
That means continuing to look at regulation.
But it also means a full, open and independent inquiry
What is it that makes the Bollinger trader behave as he does?
What is it that leads to the corrupt selling of products to small
What is that leads to millions of people being mis-sold mortgage
Imagine if this was happening in another profession.
Medicine, law or teaching.
Of course, there would be a moment of reckoning.
Like the Macpherson inquiry into institutional racism in the
That wasn’t saying most members of the police were racist.
It was saying there was an institutional problem in the Met.
A way of doing things that was wrong.
The press is currently facing Leveson.
Most member of the press try to do the right thing and act in the
But the culture and habits of some in the press have affected the
reputation of them all.
If the police and the press have to face an inquiry, why should not
The Prime Minister says he’s really not sure we need an inquiry.
How out of touch can you get?
I have news for David Cameron: the people of this country want a
moment of reckoning for our banks.
The British people will not tolerate the establishment closing ranks
saying we don’t need an inquiry.
They want a light shone into every dark corner of our banking system.
They want bankers held to account.
They want the system rebuilt.
Nothing less than a full public inquiry can do that.
Sticking plaster solutions will not heal this wound.
And nobody has confidence that the current plans of this government
or the industry will be sufficient.
Nobody believes either that the scandals of the last week are the end of the story.
So we need a full, open and independent inquiry which the public can
We need a new code of conduct for bankers.
Two years ago, there were calls for a new code to regulate bankers’
behaviour. But the industry has failed to act.
For all we know the traders responsible for the interest-rate fixing
are still working in the industry.
The inquiry should be tasked with coming up with a new code within 12
The values of integrity, responsibility and stewardship must be put
back at the heart of the British banking industry.
And those who breach this code should be struck off and never allowed
to work in British banking again.
We also need legal powers to make prosecution easier when crimes have
Not one person has gone to jail in Britain for what they did during
the financial crisis.
How can it be that someone is sent to prison for stealing £50 worth
of goods from a shop but there is no punishment for those who lie and
cheat to gain millions of pounds?
The Justice Secretary said this morning that our prosecution of white
collar crime is inadequate.
Then we should do something about it: change the law.
We need full implementation of the Vickers recommendations.
Only two weeks ago, against the express wishes of John Vickers, the
government watered them down.
The whole idea of Vickers is to separate retail and investment
banking to ensure that retail banking is a simple, straightforward
and low-risk industry.
This week we have seen the scandal of small businesses being mis-sold
high risk insurance schemes by banks.
John Vickers said this must be classified as part of investment
The banks lobbied against Vickers’ recommendation.
And the government caved in.
Of course they should reverse this decision.
What greater evidence could there be that this government has neither
the inclination nor thecapacity to bring the change that Britain
We also need proper competition in our banks.
Part of the reason the banks were able to behave as they did was
because they were too big and too powerful.
The government has moved far too slowly on competition.
We need new challenger banks in the market.
Challenging the stranglehold of the big four banks.
And once and for all, we need to sort out the scandal of pay in the
Reward for reckless risk, not long-term commitment.
There should be an ordinary branch employee on the Board of every
There should be annual binding and transparent votes on remuneration
And to put an end to the cosy cartels, institutional shareholders
should be on the boards that appoint Directors.
The government is refusing to do all of these things.
So the bonus-as-usual culture will carry on.
This inquiry must, most of all, get to the bottom of what has
happened and change the practices of this industry.
To restore confidence and make the banks serve the public again.
A banking system that plays its part in getting finance to the firms
that need it, not just bonuses to the executives who work in it.
A banking system that can help underpin British innovation and enable
us to pay our way in the world.
A banking system which serves the family which wants to buy a home.
A banking system where every banker arrives at work knowing they need
to be honest to keep the trust of their customers.
A banking system that serves the public not itself.
And let’s finally understand also the deeper lessons of this crisis.
Why this hugely important sector of our economy has fallen into
disgrace and disrepute.
This scandal tells us something not just about the culture of
banking, but about the ethic of our country and the way it is run.
Just like phone hacking.
These are not isolated instances. They are connected. Showing deep
problems about the direction of our country.
About organisations that thought they were too powerful to be held to
About rules that encouraged short-term, take what you can, in it for
About people in the most powerful and wealthy corners of society
leading separate lives, acting irresponsibly.
About an economy that works only for the very few at the top.
A society that is more divided than ever between the richest and the
And a politics that people don’t believe speaks for them.
If anything tells us that we need profound change in the way Britain
is run, this crisis is it.
The British people stand for values of responsibility, integrity,
reward linked to effort.
That is why there has been such a wave of anger at the latest
scandals in the banking industry.
The government may not get it.
But the British people deserve better than this.
They deserve a country run according to their values.
That is what this moment demands.
In our economy.
In our politics.
That’s our task.