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Reforming Financial Markets

My Lords, the Chancellor’s Statement, which the Minister kindly repeated, represents an inadequate, complacent and muddled response to what is undoubtedly a very complex, but also very important, problem. I do not want to dwell on the past, but since this has come up I have to say that the Minister inadvertently misled the House. Conduct of business regulation and prudential supervision of the banking system are two quite separate activities. Both have their place and both are very important. It was the conduct of business regulation of the financial sector that was divided pre-1997. Prudential supervision of the banking system, which is at the heart of the matter, was greatly strengthened by the Banking Act 1987, which I put through. It was not divided at all. It was weakened by the present Prime Minister in 1997, and that is one of the reasons for all the subsequent problems. The noble Lord expected me to say something about Glass-Steagall and I will not disappoint him. Does he recall that on 24 June the Governor of the Bank of England, giving evidence to the Treasury Committee in another place, revealed that, culpably, the Government had not consulted him on the proposals that they were working on? He also explicitly drew the committee’s attention to, and agreed with, the remarks of Paul Volcker, the former chairman of the United States Federal Reserve system and now an adviser to President Obama, who said that commercial banks, ""funded in substantial part by taxpayer-protected deposits"—" should not— ""be engaged in substantial risk-prone proprietary trading and speculative activities that may also raise questions of virtually unmanageable conflicts of interest"." In the Statement repeated by the noble Lord, he described this separation as "simplistic". Is he really saying that the views of the highly experienced Mr Volcker and the Governor of the Bank of England are simplistic?