Top economist: Go further than breaking up banks

The Univerity of Wolverhampton's Roger Seifert chided "half-baked" calls from the Institute for Public Policy Research (IPPR) to increase competition on Britain's high streets as a cure-all for the financial crisis.

The IPPR's Don't Bank On It report released today condemned the coalition's "timid" approach, saying banking reform should begin with hiving off investment banking arms and then carving up the biggest remaining retail banks.

With no bank "too big to fail" the industry would be less likely to see the same bailouts paid out ever since the 2008 financial collapse, it said, while increased competition would drive down costs for customers.

But Professor Seifert told the Star today the pitch was "nonsense.

"It's a form of political vanity that they think they can control the global financial industry with nothing more than regulatory levers."

Professor Seifert said he did not agree with calls to simply scale back the industry as it would cost jobs without creating "substantial" change.

But likewise increasing the nominal number of banks would make "no difference at all" to insulating Britain from another global collapse.

Direct intervention, like the 41 per cent stake in bailed-out bank Lloyds TSB, was the only solution, he said.

"The only way at all it is to take Lloyds TSB into complete public ownership.

"If you take them and run them as a public interest company, if it's a big player then that will force everyone else to change their practices," he said.