Miliband calls for national investment bank for business

Lending to small firms fell by £10.8bn last year, he said. This showed that Project Merlin, the government-backed scheme for five banks to increase loans by £11bn in 2011, had not 'met its objectives'.

Too often, banking ‘does not work for small businesses’, he said. There was a need to look a British Investment Bank, ‘which would provide government backing for entrepreneurs when the market fails’.

A national investment bank would mirror those in other countries, including Singapore, Germany and the US, which had helped technology companies such as Apple and Intel when they started.

Miliband added: ‘This isn't about picking winners. It is about the state getting the market moving, like our most successful competitors have been doing since the 1950s.’

He also called for banks to change the way bonuses are paid. Public discontent was rising about bonuses ‘beyond the imagination of the vast majority of the population’ being paid to those who in part caused the financial crisis.

All banks, including those that have not been bailed out by the taxpayer, enjoy ‘an implicit taxpayer guarantee’, estimated at around £10bn, that they would be assisted in an emergency, he said.

‘That means that many of the bets they make are one-way bets, backed by an implicit taxpayer-funded safety net.’

There should therefore be more transparency on pay packages, with the published details made simpler so shareholders could better hold them to account.

At the majority state-owned banks of Royal Bank of Scotland and Lloyds, the government should also ‘exercise some shareholder oversight on top pay’ to stop large bonuses, he added.

‘All I ask is that the government should practise what it preaches to other shareholders and take some responsibility for the pay and bonuses of publicly owned banks.’