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UK opposition says big banks must never again be 'masters of the economy'

Reuters/London 15 Sep 18 | 07:19 PM

John McDonnell | Photo: Reuters

London's vast financial sector must never again be the "masters of the economy", the finance spokesman of Britain's opposition Labour Party said, accusing bankers of profiting from speculation at the expense of ordinary people.

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John McDonnell, a veteran socialist who is now seeking to reassure business, promised higher taxes and tougher regulation on banks on the 10th anniversary of the collapse of Lehman Brothers - the pivotal moment in the global financial crisis.

"The key lesson is this: never let the finance sector become the masters of the economy when they should be the servants of the economy," he said in a speech outside the Bank of England on Saturday.

He said ordinary people were still paying the price for the crisis through falling living standards and cuts to public services, and a Labour government would redress the balance.

With Prime Minister Theresa May's government weakened by her Conservative Party's infighting over Brexit, Labour is hoping her minority government will collapse.

Most recent opinion polls show Labour level with the Conservatives, meaning they could form the next government, although the next election is not due until 2022.

Labour would introduce a financial transaction tax to extract more revenue from the City of London by expanding an existing tax on shares to trading on other assets such as bonds and derivatives.

ALSO READ: 10 years of Lehman crisis: What we know, and the lessons we've learnt

"The finance sector has a responsibly to deliver the resources that we need," he told the rally held by a variety of unions and campaigns including one called "Change Finance".

Despite his previous antipathy towards bankers, McDonnell is trying to win the support of financial bosses, just as former Labour leader Tony Blair helped prepare his party for power with what was dubbed the "prawn cocktail offensive" in the 1990s.

For example, McDonnell went for talks with the Wall Street bank Goldman Sachs earlier this week to discuss Britain's upcoming departure from the European Union.

ALSO READ: Lesson from Lehman crisis: Stay invested in equities even in bleak times

He said his message when holding meeting with bankers and asset managers was simple: "You'll get a decent rate of return but we're not being ripped off anymore. Ripped off by speculation, privatisation, job cuts, exploitation of workers."

A Labour government would also try to end tax evasion and tax avoidance, and seek to tackle the issue of overseas companies owning properties in London, which he said has caused speculation and forced up prices.

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