Financial Services Bill

I agree with the hon. Gentleman that this is not a case where there is a definite right answer, although there are plenty of definite wrong answers. This is not a case where I am saying "Absolutely" from the start, so I think he is mistaken—I am not saying that at all. What I am saying is that we have made a distinction regarding the functions of the central bank, which essentially involve monetary policy—obviously—and macro-prudential issues, where the bank needs to take an overview of what is going on in the economy in terms of its monetary duties and financial stability. A single organisation that deals with monetary policy and with some of the bigger macro issues, and which is responsible for the individual regulation of banks large and small, as well as of financial advisers, some of which are very small indeed, makes no sense. There are frequently times when it would be very tempting to tell one person, "You're in charge of the lot—sort it out. If you don't, everything will be your fault and you'll have to make way for someone else." However, we have to remember that when the Bank of England was responsible for the larger banks years ago, there were far fewer of them. They were also all very British, in the sense that they were based here and the people we had to deal with were here, not spread throughout the world. However, the Bank of England never dealt with the insurance companies, it could not deal with what happened in the '80s, when we saw the growth of bank assurance, and it could not and never did deal with some of the other financial institutions that can affect financial stability. We can argue where we should draw the line, and wherever we draw it there will be anomalies. However, the system that we have—we should remember that the FSA took over from about nine different self-regulatory organisations 12 years ago—represents a sensible way to proceed. It is easy for the FSA and the Bank to work together, and the Treasury will always be at the table in times of crisis, for the perfectly obvious reason that any rescue will have financial implications. However, I honestly do not believe that bringing everybody under the same roof—it would be a very large roof indeed—makes any sense. The hon. Member for Tatton (Mr. Osborne) mentioned Jacques de Larosière, who was asked to produce a report for the European Union, and I wanted to touch on that earlier, because the House will be interested to know where we have got to. In Europe we will not, of course, have a single regulator. De Larosière suggested, first, that there should be a council for financial stability, which is advisory, and that is fine. The European Central Bank clearly has a view as to what is going on in Europe, but of course, its relationship is not the same with every country, for perfectly obvious reasons. De Larosière is also setting up three agencies to look at different aspects of the financial sector. All that sits together with the individual national regulators, and that in itself—the hon. Gentleman and I might have more common ground here—is problematic, shall we say? We are trying to solve some of these problems, but they are there.