In an attempt to cast himself as a humble alternative to Prime Minister David Cameron, UK opposition leader Ed Miliband has criticized tax cuts for the rich will unveil measures to reform the British banking industry.
Miliband, speaking to the BBC, said he would restore the 50 percent tax rate for the country’s highest earners if he was elected tomorrow.
His party would also fully implement the recommendations of Vickers commission on banking reform, aimed at insulating retail banking from the vagaries of investment banking. The commission also suggested banks should hold a minimum level of capital.
In the absence of substantial change in banking practice, Labour would also introduce regulation akin to America’s now-defunct Glass-Steagall Act, shadow finance minister Ed Balls told CNBC on Tuesday. That U.S. statute, implemented in the wake of the Great Depression, mandated a separation between commercial and investment banking activities.
“We had the Vickers commission report which proposed what people call technically ‘the hard ring-fence’,” he said. “Our government is watering that down. They’re not going at all for the Vickers vision.”
“We’re saying to the banks as well, you’ve got to show that culturally your understanding that delivering for the real economy, for small businesses and for families is your prime mission.”
The British Bankers’ Association lobbied the current government in an effort to put its views across on Vickers’ proposals, with “notable success”, the Bureau of Investigative Journalism reported in July.
The BBA themselves have told CNBC that the government have yet to make any decision regarding the report.
“We are currently working with the Government and regulators to implement these significant changes to strengthen our banking system,” a spokesperson told CNBC.
“We are also working with international authorities, such as the European Central Bank and the International Monetary Fund, who recognized in their research that broad-based banks could be better equipped to support their customers in times of difficulty.”
On Tuesday, Miliband will paint himself as a down-to-earth, state educated leader, coupling his keynote speech to the delegation with a personal film of childhood moments. Labour have been quick to pounce on comments made in April by a rebellious Conservative politician likening her leaders to "two posh boys who don't know the price of milk".
It's believed Miliband will further criticize the so-called “50p tax rate” — a 50 percent tax for those earning over 150,000 pounds that was reduced to 45 percent in March.
An independent grassroots campaign for lower taxes, the Tax Payers’ Alliance, told CNBC that Miliband sends the wrong message to investors.
“We are already seeing an exodus from Paris of those fleeing President Hollande's proposed punitive tax rate on France's top earners and the last thing the UK can afford is a brain drain of its own,” Chief Executive Matthew Sinclair told CNBC.com.
“Far from bringing in money for Treasury coffers, the 50p rate at best raises virtually nothing and at worst actually reduces the total tax take."