Bankers’ bonuses could be clawed back for 10 years in cases of misconduct – rather than the current seven – under proposals unveiled by the shadow chancellor, Ed Balls.
Labour also promised it will require banks to publish the number of their employees earning more than £1m.
The proposals form the centrepiece of measures to reform banks ahead of next week’s publication of the opposition’s plan for the economy.
Labour also confirmed all funds raised from the planned increase in the licence fees for the mobile phone spectrum – estimated to be up to £1bn in the next parliament, subject to Ofcom consultation – will be allocated to the British Investment Bank.
Balls said he welcomed the Competition and Markets Authority inquiry into the lack of competition in banking and said he would like to see at least two new challenger banks and a market share test to ensure the market stayed competitive for the long term.
In his briefing, Balls made no reference to plans for a powerful network of regional banks, but Labour sources said the proposal remained on the table and long-term lack of funding to business by banks remained a central issue for the UK economy.
The shadow chancellor said: “We will extend to at least 10 years the period bank bonuses can be clawed back in cases of misconduct. As we have seen in recent days, wrongdoing can take years to uncover.
“The current proposals to claw back bonuses are too weak and do not cover a long enough period of time. We will ensure people involved in misbehaviour and misconduct would have to give back their bonuses for at least a decade after they have been paid out.”
Balls said that too often in recent years British banks had fallen short of the standards expected of them. “After so many scandals we need major reforms and long-term cultural change to restore trust and ensure our banks start working for consumers and businesses again.”
He said that bank lending to businesses had fallen “year after year” under the coalition government. “This just isn’t good enough. Without access to finance, SMEs [small and medium-sized enterprises] cannot grow and create the high-quality, well-paid jobs we need to increase living standards.”
A Conservative spokesperson responded to Balls’s comments, saying: “Since 2010 we have been clearing up the mess left by Ed Balls and Ed Miliband. We’ve put the Bank of England back in charge of regulation, separated investment banks from people’s ordinary savings in high street banks and – to tackle the issues around bonuses – we’ve introduced the toughest system of clawback and deferral of any financial centre in the world.”
The proposals came as the Co-operative party – which stands joint candidates with Labour in some seats – tabled proposals for the Labour manifesto urging the party ensure that all businesses with more than 50 employees are obliged to set up a profit-sharing scheme with their staff, with a minimum profit share pot set aside based on a calculation of its annual profits.
The plan is similar to legislation in France where companies can choose to distribute rewards either as a flat rate to employees, in proportion to wages, or in proportion to the hours worked in the previous year. It also calls for a new “duty to involve” so employees are given formal roles in company decisions on bodies such as works councils.
The Co-operative claims the prevalence of profit-sharing schemes, along with other mandatory John Lewis-style approaches in France, contributes to higher levels of productivity than the UK. In 2012 (the most recent year for comparison), France had the second highest level of productivity per hour worked in the G7, more than 30% higher than the UK, which is languishing in sixth.
Office for National Statistics figures on company size suggest there are 36,000 companies with 50 or more employees in the UK, employing a total of 12.9 million people.
Last week, Miliband endorsed Co-op party policy proposals to support co-ops and mutuals and create a right for workers to request employee ownership.
Populus polling commissioned by the Co-operative party shows 76% are in favour of employees having a bigger say in how a company is run, as well as profit-sharing schemes.
