Move over Darling Part Two... How about some basic principles to underpin your latest huge banking bail out? Afterall, we're all paying for it.

What we saw today was Lloyds saying that it no longer needs the insurance of the government's asset protection scheme. It has somehow convinced the government that it no longer needs the insurance and will attempt a £21bn fundraising exercise, with £13.5bn coming from the largest cash call ever on the London market. Oh, and we taxpayers will have to buy £5.7bn of new shares to maintain its stake at 43%.

RBS will still need the insurance from the government on revised terms, and will place some £282 billion in toxic debts into the Asset Protection Scheme - essentially a taxpayer-backed insurance scheme. As a result the taxpayers' stake in the bank will rise from 70% to 84%. The government will put in £25.5bn of capital and have another £8bn in reserve.

Nice money if you can get it.

What was also announced today was the break up of the part-nationalised Royal Bank of Scotland and Lloyds Banking Group. RBS is selling RBS-branded branches in England and Wales, its NatWest branches in Scotland, the Churchill, Direct Line and Green Flag insurance operations, and parts of its investment banking business.

Breaking up the big beasts that we have had to rescue is welcome, but what sort of banking system are we aiming to create? Buying shares and propping up the banks - even if they are broken up - risks simply starting the bubble all over again unless some serious reforms are made.

Indeed, Labour have to come up with a set of basic principles on which to base the banking restructuring, something they have so far failed to deliver. In saving (at our cost) the banking system we suggest the following reforms to the banking system for wider public and business benefit:

1. Make sure the banks (which we've bailed out) deliver on promises to lend to British businesses - which are still suffering from the effects of the credit crunch.

2. Avoid putting revenue-raising for the government as the number 1 policy goal. The key goal should instead be a sustainable banking system that serves business and households and which avoids another catastrophic failure. What we've seen is that the financial market system can - we hope - one day be a good servant, but is a very poor master.

3. Deliver on Gordon Brown's promise to set up an industrial bank, an infrastructure bank and a mortgage bank. The industrial bank needs to provide long-term, patient finance to business and could be regionally based.

4. There needs to econo-diversity in the banking system to give consumers choice about where to bank, and to offer low-risk, high-quality services. That should include PLCs, mutuals like a renewed Northern Rock, as well as state-owned banks which would lend at competitive rates and help keep the sector competitive.

5. The utility function of banks needs to be separated from their high-risk casino activities - at the moment banks are literally too big to fail and there is a moral hazard problem for bankers' high-risk gambling. The state needs to support basic banking services for businesses and households, but should let casino banks go bust if need be.

6. Bankers' bonuses (some £6 billion this year) need to be taxed (we'd suggest at 100% this year) to put money into an industrial bank backing a green new deal. Many of the bankers wouldn't even have a job, let alone a bonus, if the state hadn't rescued the entire banking system.

7. Competition policy needs reforming. Darling now claims that having 'half a dozen' banks is not enough - well under your current competition law, Mr Darling, it's perfectly OK. We need to re-assert a 'public interest' element of competition policy - something Labour has mistakenly tried to row back from in recent years. That would also mean stopping banking takeovers not in the public interest (and indeed other takeovers in manufacturing - think Cadbury's).

8. Big banks' control of the insurance market also needs tackling. The possible demerging of Churchill and Direct Line from RBS (how many readers knew they were all one company?) could bring more competition, but we also need econodiversity here as well. The government could for example, demerge Churchill or Direct Line from RBS and set them up as mutual and/or a state corporate entity in the market, to improve efficiency and competition.

Simply splitting up banks and leaving them to the market, with state guarantees and insurance, risks repeating another bubble and this whole mess all over again. More serious reform is needed if finance is to again serve society and business, rather than the other way around.