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Action on banks and bonuses

Conference notes
a) the importance of a healthy banking system to the future of Britain’s economy
b) the regrettable failure of decades of ‘light-touch’ regulation that socialises risk and privatises extraordinary profits at the expense of sustainable investment and growth.
c) that Liberal Democrats have long emphasised the need to tackle disproportionate rewards for risky financial behaviour and the concentration of power in the hands of a few in the City of London
d) that the Independent Banking Commission is likely to postulate significant reforms later this year.

Conference therefore welcomes the aims of the recent ‘Project Merlin’ agreement with the UK’s leading banks to:
• Increase the credit available to British businesses
• Improve transparency over executive pay
• Reduce the overall bonus pool.

However, Conference is concerned that
i) the ‘Merlin’ reforms are insufficient
ii) the language of the ‘Merlin’ agreement is weak and will be hard to enforce, particularly with regards to net lending to business and transparency on bankers’ remuneration, with no disclosure requirement for the highest earners not on the Board.

Conference therefore calls on Liberal Democrats in Parliament, and most importantly those in Government, to ensure that the recommendations of the Vickers Commission are carried out promptly and in full. Conference calls for:
A) Banks supported by the taxpayer to be broken up into smaller, safer entities, with effective competition restored and full disclosure of all pay packages larger than that of the Prime Minister while they remain State-owned.
B) All large-scale banks to divest their investment banking arms, with no explicit or implicit State guarantee for this activity.
C) Pay transparency to be extended to highly paid traders and other employees, not just Executives, with salary and bonuses that exceed an agreed ratio to median salary to be published alongside an explanatory justification.
D) Large financial institutions to hold greater capital reserves and to make ‘living will’ arrangements to act as stabilisers in the event of further market failures such as those seen during the recent financial meltdown.
E) The imminent Green Investment Bank to be a fully functional bank and not a fund, securing much-needed investment in low-carbon technology and jobs.
F) Measures to tackle financial exclusion for individuals and small business, with a Basic Banking Guarantee; a public bank administered through Post Offices; a commitment from high street banks to provide fee-free ATMs within walking distance of all deprived communities; as well as reducing unfair bank, credit card and loan charges.
G) Greater support for local credit unions and mutuals.

The ‘Project Merlin’ agreement reached yesterday between the government and the UK’s leading banks is to be cautiously welcomed as a necessary but insufficient step towards wholesale reform of the financial services sector. In particular, the SLF welcomes the 15% increase in funds available to small businesses and the small move towards greater transparency on executive remuneration – but the deal as a whole fails to tackle the fundamental failure of our financial system to serve the wider economy.

Although the government will point to an increase in overall lending targets, monitored by the Bank of England for delivery, once adjusted for inflation this increase is unlikely to prove sufficient to revive British business. In addition, the modest moves towards greater pay transparency fail to include non-executive traders, whose pay and bonuses often make them the highest-paid members of staff in some banks; when coupled with the payment of bonuses – albeit in deferred stock and not cash – to those in State-backed banks, the reforms to bankers’ pay don’t go nearly far enough.

Perhaps most important of all are the structural changes to the tax regime banks will be subjected to, including but not restricted to lower corporation tax and exempting revenue generated in other jurisdictions completely; despite the extra £800m in revenue brought in by extending the bank levy, it remains possible that banks will contribute less to the Treasury than in recent years, an unacceptable green light for the sector’s destabilising practices.

Business Secretary Vince Cable rightly argues that we should reserve judgement on the government’s policy on banking until Sir John Vickers’  banking commission reports later in the year – the danger is that in the meantime Merlin’s tinkering is passed off politically as genuine reform, undermining the need for the root-and-branch overhaul that is clearly required. In arguing for the continued need for real reform Vince has lost a valuable Parliamentary ally in Lord (Matthew) Oakshott, who felt he could no longer support the government’s approach to the banking sector.

We sincerely hope that Vince, and all Liberal Democrats, will lobby hard to implement Liberal Democrat policy; to separate high-risk ‘casino banking’ from service vital to the financial health of the nation and to pursue the break-up of nationalised banks into credit unions and mutuals. We call on Lib Dems to ensure that the political muscle of the City doesn’t capture government policy-making, which must always keep the interests of British business and citizens at its core.

On Thursday February 3rd 2011 MPs will vote on a motion tabled by Stella Creasy MP (Lab, Walthamstow), on whether to introduce caps on lending rates charged for payday loans and other unsecured debt – the Social Liberal Forum supports the motion, as well as the wider campaign to end legal loan sharking run by Compass.

The motion will be voted on a day before Ms. Creasy’s Private Member’s Bill [Consumer Credit (Regulation and Advice) Bill] gets its second reading in the House of Commons, and is worthy of support on several grounds:

• As the Compass campaign highlighted so effectively, “around 3 million people use high cost door to door loans which often charge £83 in interest and collection charges for every £100 borrowed” – equivalent to APRs in the hundreds if not thousands of percent.
• Since the recession the number of vulnerable people relying on such loans to make ends meet has gone up, further highlighting the need to prevent their exploitation by profiteering loan sharks.
• As pointed out by SLF Council member Linda Jack on her blog, the measures called for in the motion, the campaign and indeed the Bill fit well with existing Liberal Democrat policy, which call for caps on interest rates charged by credit and store card providers as well as better regulation of the unsecured debt market.

Thursday’s vote follows the launch of an All-Party Parliamentary Group (APPG) on Financial Education, co-chaired by MPs Justin Tomlinson (Con, Swindon North), Stella Creasy and Duncan Hames (Lib Dem, Chippenham). The cross-party support for the measures outlined in the motion on loan sharks and by the APPG represent real examples of pluralist politics, and we expect that partisan considerations will be put to one side for this initiative. It is crucial that Parliament votes in favour of rate caps to protect the vulnerable from exploitative lending practices, and we look forward to seeing Liberal Democrat MPs offering their support.

The Social Liberal Forum has expressed its concerns regarding Lord Browne’s review of Higher Education funding, and called for a fairer system to be implemented.

In responding to the Browne review, both Deputy Prime Minister Nick Clegg MP and Business Secretary Vince Cable MP made it clear that although they ‘supported the thrust of the review,’ the government will take into account alternative views before presenting their actual policy. This gives all of us, in particular Social Liberals within the Liberal Democrat party, to lobby hard to ensure that the reforms to tuition fees are fair, progressive and equitable.

The SLF therefore calls on all its supporters to write to their MP, expressing their concern over Lord Browne’s recommendations and reaffirming our belief that unless HE is to be funded through general taxation, any graduate contribution must be fairly instituted without saddling students – particularly those least able to afford it – with more debt. Below is a draft letter, which we would encourage you to copy, amend and send to your MP – using the box below (kindly provided by the folks at mySociety.org via writetothem.com) you can go straight to a website which allows you to write to your elected Parliamentary representative.

Copy and Paste the text from our letter into the form on that site, amend the text to personalise your letter (remembering to add you name, address and contact details as well as you opinions!), and send it to your MP.

Dear [MP’s Name]

I am writing as a constituent to raise concerns over Lord Browne’s proposed reforms to the funding of Higher Education (HE). Whilst I recognise the need to adequately fund HE, I believe that many of the key principles in Higher Education – widening participation, fair access and financial equity – would be at risk if Lord Browne’s proposals were implemented in full. My main concerns are that:

• Large increases in fees will lead to even greater debt, which I believe would work against fairness because the poorest students will tend to have the greatest debts.
• Using differential interest rates rising with earnings is less progressive and less fair than a graduate tax, a graduate contribution or general taxation because those from wealthy backgrounds will have smaller debts if their families can afford to pay up front or soon after graduation.
• Any benefits of higher repayment thresholds would be lost by the introduction of commercial interests rates, and low paid and women graduates would be faced with the prospect of rising debt through their twenties and thirties.

In responding to Lord Browne’s report, Deputy PM Nick Clegg MP and Business Secretary Vince Cable MP have made it clear that government policy need not follow the Browne’s recommendations in full – that they are willing to consult with MPs and the public over the bet way to fund HE in a fair way.

I therefore request that you press for a system that ensures the abolition of student tuition fees, the reduction of student debt and their replacement with a graduate contribution, varying progressively with income and set at levels which do not deter students from taking less well paid, but socially beneficial, post-graduate employment. Structural reform of HE – including but not limited to shorter degrees, greater emphasis on non-academic training and technology-driven distance learning – should be considered to avoid costly increases in fees.

Prior to the General Election many Liberal Democrat MPs signed a pledge to vote against any increase in tuition fees. The higher student debt proposed by Lord Browne would be a serious threat to fair, merit-based access to Higher Education, not to mention a threat to the Coalition.

I urge you to meet with Business Secretary Cable and present my concerns to him, and to contact me once you have done so; this will help ensure that government institutes a fair graduate contribution, with repayments that reflect graduates’ ability to pay, as it is the best policy to help the UK’s HE sector remain world-class without placing a burden of debt on young graduates. I look forward to hearing back from you on this matter.

Yours Sincerely,

As and when you hear back from you MP we’d also appreciate it if you could update the comments section below!

Sorry we’ve been quiet for the last few weeks – for reasons that will become apparent below.  We had a tremendously successful conference season and would like to welcome everyone who signed up to this newsletter at one or other of our fringe meetings.

CONTINUITY AND CHANGE

The Social Liberal Forum executive has undergone some significant changes over the past couple of months.  Sadly, Richard Grayson and Alison Goldsworthy have resigned from the executive.  Alison has had to leave due to other work commitments while Richard is working hard on the party’s Federal Policy Committee and Manifesto Working Group.  We wish them both the best of luck and would like to take this opportunity to thank them for helping to get the SLF on its feet during its first few months.

The remaining executive members – Director Matthew Sowemimo and Secretary James Graham – are being joined by David Hall-Matthews and Peter Kunzmann.  David is a respected academic and a former Lib Dem candidate (Leeds North West, 2001) who readers of Reinventing The State may recall contributed a chapter on international development.  He takes over from Richard as the Chair of the organisation.  Peter has worked for the party and a number of MPs over the years and has a special interest in using public policy to promote happiness.

The one thing our change in personel has highlighted is the need for the SLF to get itself on a firmer democratic footing.  This has always been part of our plans after the general election, but we have decided to bring these forward.  Watch this space for more information.

MANIFESTO PRIORITIES

The new Social Liberal Forum executive has published a joint statement on what we see are the key priorities for the next Liberal Democrat manifesto.  These include:

• A firm commitment to reduce income inequality over the course of the next Parliament;
• The richest in society should take a greater part of the strain in reducing the budget deficit and we should present ourselves as the party of fair, redistributive taxation;
• A low carbon economy and a global climate change agreement based on the principles of contraction and convergence;
• Youth unemployment should be another priority – the party is right to stick with its commitment to scrap tuition fees.

The full statement can be found here.

SOCIAL NETWORK

Many thanks to the dozens of you who have joined our Social Network over the past few weeks.  If you have not done so already, please do: http://socialliberal.ning.com/

Although only early days yet, this Social Network is set to be crucial tool for coordinating our activities.  Please join so we can keep you better in touch.

Cheers,

James Graham
Social Liberal Forum

Hope you had a good summer.  With the conference season now in full sway, we just wanted to let you know about the Social Liberal Forum’s own plans next week.  Please do come to our fringe meeting next Monday.

PARTY CONFERENCE

The Social Liberal Forum will be holding a joint fringe meeting with Compass on Monday 21 September at 20:15-21:15 in Connaught 1, the Connaught Hotel.  "Overcoming political barriers to equality" will feature Steve Webb MP and Neal Lawson, the Chair of Compass and author of All Consuming.

Full details are available on Facebook, Flock Together and Ning.  As well as attending, we would really appreciate it if you would also help promote it by inviting your friends to attend.

At the Labour Party conference the following week, Evan Harris MP will be speaking at another joint event with Compass and the Social Liberal Forum at the Lowy Suite, Best Western Brighton Hotel on Wednesday 30 September at 12:45-13:45.  If you are attending Labour conference or live in Brighton, it would be great to see you there.

NEW ON WEBSITE

Over the last few weeks we have added two more chapters from Reinventing the State: "Equality Matters", by Duncan Brack and "Reforming the NHS – a local and democratic choice" by Richard Grayson.  In its second printing, Reinventing the State is currently available direct from the publishers Methuen at the discount price of £10.

We are always on the lookout for new material to put on the Social Liberal Forum website.  If you would like to write a short article, please send a 50-100 word summary of what you would like to write to james@socialliberal.net.

SOCIAL NETWORK

Many thanks to the dozens of you who have joined our Social Network over the past few weeks.  If you have not done so already, please do: http://socialliberal.ning.com/

We’re planning to use this network to develop meetings and activities in your local area.  The more people who sign up, the more we can do.