---

Regulatory and Banking Reform

What utter contempt the Government are showing to Parliament by announcing these major proposals first to the bankers in the City yesterday and only today to elected representatives. Time and time again, Ministers give policy speeches outside this place and the House of Commons is merely an afterthought. Why is the Chancellor not here to make these announcements today? That total disregard for the democratic process is reflected in the draft legislation, which hands vast new powers over the lives of all our constituents to the unelected Bank of England and leaves a gaping accountability deficit, with no mention of parliamentary accountability in all its 408 pages. Why are Ministers still so sketchy about the detail of these new powers for the Bank of England, with nothing on the face of the Bill, and is it true that there may be no further clarity on the toolkit for the Financial Policy Committee until next year? Why is there still no clarity about the crisis management memorandum? Why have the Government not yet published the consolidated Financial Services and Markets Act 2000 draft for Parliament to see? Why is there no clarity about where consumer credit regulation will fit into this alphabet spaghetti of new quangos? Why are they still fumbling around with the composition of the Financial Policy Committee? Why have they failed to negotiate the flexibility needed from the European Union and the European banking regulators to ensure that all these new UK structures are allowed discretion to use the macro-prudential tools in the first place? There will be significant concern, especially in the Portsmouth area, about the news on the Southsea mortgage bank—Southsea is perhaps a name that resonates in other ways—but we will need to watch developments closely. Although there are clear inadequacies in the proposals published today, we will consider them carefully, and there are areas where we agree with the Government. The Chancellor is right that this was not a financial crisis made in Britain. It was caused by a failure in the banking industry in every major financial centre and a global failure in banking regulation. Families and businesses worldwide have paid a heavy price for the irresponsible actions of the banks, but Governments and regulators failed to see this coming and we in the Opposition must accept our part in that. Thankfully, however, we ignored the advice of the Chancellor, who called for lighter regulation and opposed the previous Labour Government's decisions to step in to prevent financial catastrophe by nationalising Northern Rock and Royal Bank of Scotland and by cutting VAT to get the recovery moving. Today's announcement vindicates the rescue measures taken by my right hon. Friends at the time and shows that taxpayers always had a good chance of recouping the lion's share of the sums involved. But on Northern Rock, can the Minister explain the haste in the sale? We hope he is not playing politics and rushing for a fire sale when a measured approach to maximising value and diversifying the banking system would be better. Why has the Treasury failed to consider mutualising Northern Rock and is the Minister really content to see it return to business as usual as yet another plc without exploring the benefits that a new building society might bring? There are three tests by which the Chancellor and the Minister should be judged. First, are taxpayers and bank customers adequately protected from future bailouts by the so-called firewalls in the bank structures? How can the Chancellor say he agrees with the conclusions of the Vickers Banking Commission before it has even published its final report? Secondly, has the Minister secured sufficient international agreement on regulation and bank restructuring to secure a workable system protecting jobs here in Britain? Sadly, the Treasury has already shown a woeful lack of leadership internationally on pay transparency and bankers' bonuses, which, by the way, should be taxed to pay for jobs and businesses here at home. Thirdly, will we end up with a banking system that delivers the goods for our economy as a whole? Are small businesses getting the bank loans they need and why is Project Merlin already unravelling with confusion between the Department for Business, Innovation and Skills and the Treasury over so-called ““stretch”” targets, or capacity targets, how they are going to be enforced and whether the banks are really participating wholeheartedly? We need a diverse banking system, which should include a strong mutual sector—something that was promised in the coalition agreement but that the Government seem uninterested in delivering. We need clear and comprehensible regulatory structures with far clearer lines of accountability, and we need a Government who put customers, taxpayers and the real economy first.