Turning a crisis into an opportunity

John McDonnell MP, LEAP Chair (this article first appeared on Guardian Comment is Free)

The government has been consistently behind the curve on the banking crisis and the chancellor's statement this morning demonstrates that it is missing the chance of turning this crisis into the opportunity of a generation to lay the foundations for transforming our economy.

In his interviews so far today the chancellor has insisted on an arms-length role for government and on returning the banks to private control as soon as possible. At a time when many British taxpayers will be losing their jobs and homes they are being asked to subsidise the banks in the bad times, simply to allow them to return to the profiteering role which caused this crisis.

Taxpayers will want to know what they have got for their money. Under public pressure, the government has been forced into placing some limited and temporary constraints on executive pay and bonuses – and may appoint some non-executive directors. Not a lot for £500bn of public money. The government has drifted into majority or sizeable ownership of individual banks without any coherent strategy about how to use its shareholding.

Let us be clear, the banks which the government has taken into part-nationalisation would have collapsed entirely where it not for government intervention. The billions invested today surpass even the most generous estimates of the banks' worth.

The chancellor seems oblivious to the unprecedented potential the government now has to lay the foundations for transforming our economy. To give the taxpayers a return for their investment, the government should insist on an entirely restructured banking system and a new set of economic priorities for our financial institutions.

The taxpayer, through the government, should now be forcing through an agenda with control of the board: offering full transparency and stakeholder democracy for customers and the workforce. There should also be a no-redundancies guarantee for bank workers to match the no-loss guarantee to depositors.

A new lending strategy of these nationalised banks must prioritise tackling the worst effects of the recession. We need to promote employment through investment in major public works schemes to meet the UK's needs. We urgently need a major programme of investment in renewable energy generation to tackle climate change. Likewise we need a national programme of council house building to tackle existing housing need, and to provide a safety net for those struggling to pay rent and mortgage costs as the recession deepens.

Such infrastructure investment would also mean large-scale job creation to arrest the rising unemployment levels. This would be a rights-based bank system, guaranteeing:

• bank workers and customers the right to a say in how their bank is run;
• a right for the taxpayer to see investment that benefits their community;
• a right to a secure home.

These are the opportunities the government is missing on behalf of the British public.

The public will also not look kindly if the government continues to refuse to assist local councils affected by the Icelandic banking collapse. The damage to essential local services by a forced round of cuts would be immense.

As taxpayers are paying for this bail-out, it should be their interests that now become the focus of a programme of major structural reform in the banking sector.