Financial Services Bill

This is not particularly fair to the late Eddie George as he is not here; however, I, too, had several conversations with him about precisely what happened. My conversation with him seems to have been somewhat different from the one the hon. Gentleman had. The Bank of England was not consulted, and this fundamental proposal was made on the future supervision of banking. Given that we are discussing, 12 years later, the biggest failure of banking supervision, it is worth going back to that moment. One of the reasons why I—as the current shadow Chancellor, who hopes to be in the Chancellor's job in a few months' time—have decided to publish our proposals and make a big effort to consult on them and talk to as many people as possible, including the three different parts of the tripartite regime, is precisely so that I can get my thinking right in opposition, rather than just deploying the whole thing two days after a general election, which I could of course do, following the previous model. I will come to the structure of our proposal, but also to why we think it is necessary. I will deal later with the content of regulation because I completely agree with the Chancellor that that is very important as well, but we have to look at the structure of the regulator. We have a tripartite regime under which no one knows who is in charge and who is giving official policy. We have a Governor of the Bank of England who regularly gives interesting speeches—at Mansion House, and in Edinburgh recently; he also gave evidence to the Treasury Committee last week—on how he thinks banks should be regulated. His views are very interesting but they bear absolutely no resemblance to official Government policy as just stated at the Dispatch Box. We have a chairman of the FSA, a man of great integrity and intelligence, who says that quite a lot of the activities of the banking sector are "socially useless". I do not know whether the Chancellor of the Exchequer or the Prime Minister share that view, but it has certainly been noticed not just in the City but around the world. And we have a Prime Minister who turns up at the fag end of the G20 Finance Ministers meeting and announces to a completely stunned audience—no doubt including the Chancellor—that he is in favour, suddenly, of a Tobin tax. The United States Treasury Secretary then has to give an immediate reaction to that view, and of course rubbishes it. So those who would ask "What's the view on financial services from the UK authorities?" would get three or four completely different views; that is how dysfunctional the current relationship is. The Chancellor deals with it much more than I do, but even my own dealings with the different legs of the tripartite regime—one group of people told me something completely different from the previous group who came to my office—suggest to me that this relationship is not working particularly well. The answer to all this is apparently contained in clause 1, which I remind the House says:""There is to be a Council for Financial Stability, consisting of…the Chancellor of the Exchequer…the chair of the FSA, and…the Governor of the Bank of England."" The Chancellor will be the chair of the council, which will""keep under review matters affecting the stability of the UK financial system"." That is what the great change is supposed to be: a Council for Financial Stability consisting of the Chancellor, the FSA and the Governor. I did a little bit of research, and the memorandum of understanding that originally created the tripartite regime created a standing committee—not a council—on financial stability, which""is chaired by the Treasury and comprises representatives of the Treasury, the Bank and the FSA. It is an important channel for exchanging information on threats to UK financial stability"." Unless Members can explain to me the fundamental difference between a council and a standing committee, it is not clear what this Bill achieves regarding the regulatory structure. Indeed, the only difference I can spot is that, according to the memorandum of understanding, at least the standing committee was required to meet once a month. According to the Bill, the Council for Financial Stability will be required to meet only four times a year, so the number of required statutory meetings has actually been reduced. Nor is the Chancellor required to turn up to the council. Perhaps the Chancellor can confirm this for me, but I think that in the entire period when his predecessor was Chancellor—10 years: the longest time that anyone had been Chancellor for a century—he never once physically attended the tripartite committee. There was one joint telephone conversation with the US authorities and the US Treasury Secretary; that was the only time the then Chancellor took part in the meetings of the tripartite committee—on the telephone. So it is not exactly clear how this proposal will fundamentally change things.