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Reforming Financial Markets

I acknowledge that there are many things in the paper that can be welcomed—which, indeed, we have advocated in the past—but their implementation has a timeless quality, as if we are on a kind of progression from White Paper to Green Paper to blank paper. Almost all of the important recommendations would happen after the next general election. I know that a couple of weeks ago the Chancellor was advocating that banks prepare living wills; one rather gets the feeling that this is a living will for the Chancellor. Having advocated macro-prudential regulation of bank reserves for five years or so, I very much welcome the Government's embracing it. Surely it must be right, however, that in anything that requires an understanding of the overall economy the Bank of England must have a central role—not a unique role, but a central position. That is not clear from the statement. I welcome, too, the strengthening of consumer protection. We have at last got to the idea of generic independent advice, but it has taken 10 years of campaigning by Citizens Advice and others to get there. I am not clear, however, about how the Government continue to preserve a fragmented system of consumer protection with responsibilities confusingly divided between the FSA and the Office of Fair Trading. Will that be clarified? I welcome, too, the emphasis on competition. However, does the Chancellor buy the argument of the European Commissioner, Neelie Kroes, who said that, if we are to have real competition in British banking, banks must be broken up and subdivided, and in particular the Lloyds-HBOS merger might have to be unscrambled? Does the Chancellor agree? The big issue, as the Chancellor rightly emphasised, is the major question about the banks that are too big to fail, too big to supervise and too big for the taxpayer to underwrite. He correctly said that small banks as well as big banks can go wrong—that is absolutely right—but is there not a fundamental problem that when very large interconnected banks try to be the biggest investment bank in the world, the exposure to the British taxpayer is then wholly unacceptable? Therefore, these banks have to be subdivided for that reason. The Chancellor is looking over the distant horizon at necessary reforms, but may I suggest to him that key problems exist today? The publicly owned banks are not responding to the borrowing needs of sound British companies, and the bonus culture is being reinstated in publicly owned banks that are owned by the taxpayer. There is a complete lack of direction, and I suspect that a central reason for that is that the Government are so desperate to get the publicly owned banks back into the private sector quickly that too little attention is being given to defining the public interest. I suspect that the White Paper will be received in the City with a great sigh of relief. It is yet another indication that we are getting back to business as usual.