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Economic Recovery

As is often the case, my party is represented by quality rather than quantity, which I might say. To return to financial stability and banking, the recession is a direct result of a financial crisis. The Government were absolutely right to launch a rescue. That is not to say that they are not culpable for the reasons why we arrived in that position—that is not today’s debate—but they were right to restore stability in the financial system. The real test now is whether that simply leads back to business as usual, and after being rescued the banks go back to big bonuses and ever more innovative instruments, and we start the whole merry-go-round again, or whether we come out of this with a refreshed banking system that is more responsive to the needs of commerce and industry. I have a strong belief, which I stated at greater length in Monday’s debate, that one impact of what happened in the banking system was the use of the resource of capital in unproductive speculation rather than investment in either equity or debt in commerce and industry. I would like that to change under a rejuvenated banking system. I was interested to hear the comments made by the Governor of the Bank of England in Edinburgh, because they happened to mirror what I have felt for some time. We need a return to a narrower form of banking and to segregate banks whose principal role is the provision of prudent lending for commercial purposes from those whose primary role is to take appropriate risk in investment. My argument is not about utility versus casino, but about the two separate cultures that are required in such institutions. If they are mixed together, one simply gets the worst of all worlds.