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Investment Exchanges and Clearing Houses Bill

The hon. Gentleman raises a quite complex point. We need to establish what constitutes the right balance of protection and I believe that the Bill makes important moves in seeking to ensure that we protect one of this country’s vital assets: the regulatory environment of the UK financial services sector. A recent report by the City of London corporation highlighted that the strength of the regulatory environment in the UK was one of the most important success factors in determining the strength of the City. We should also make it clear that such strength comes from getting the level of regulation right too. There is a balance to be struck between over-regulation that imposes additional costs on businesses and under-regulation that damages confidence in the market. Moving one way or the other can harm the financial services sector. The current strength of the UK capital markets is partly a result of the regulatory arbitrage between the UK and the US, as a consequence of the Sarbanes-Oxley legislation. Reflecting on the point made by the hon. Member for Edmonton (Mr. Love), I suspect that the existence of regulatory arbitrage will come under threat as the US wakes up to the consequences of the Sarbanes-Oxley legislation. We cannot rely for ever on the existence of such regulatory arbitrage to promote and allow UK financial markets to grow. We need to ensure in that aspect, as in every other, that we keep the regulatory structure under review, so that we continue to achieve the right balance.