Financial Services Bill

I agree that, having established the red lines, we need to make their existence clear in the directives and new institutional arrangements. I want the Chancellor to insist—because the issue may arise before the election—on his view that national Governments must have the final say, with the right of veto, over the decision to commit national taxpayers' resources to supporting a bank. I must also note that allowing the French to take the Commission job on financial services, for which they were clearly bidding from the beginning and was doubtless part of the horse-trading that ended in some of the other Commission arrangements, may turn out to be a serious diplomatic mistake. One goes only on the briefings in newspapers, but as far as I understand it, the Prime Minister and Lord Mandelson were against the appointment, we were told that it would not happen and that the President of the Commission would split the jobs. Then, lo and behold, Monsieur Barnier emerges as the person in the Commission responsible for financial services. There is an understandable French objective to get some wholesale financial services to France and away from Britain. I am not sure that that is the UK's national interest. Perhaps one day, in the Chancellor's memoirs—the bits that are not in the Bill; let us hope that there are more interesting bits—he will explain exactly how it all came about. Let me draw my remarks to a close with a final observation. Of course, the route to protecting the British taxpayer will never be some new banking Bill or a new European directive. What we need to deal with are the root causes of the credit crunch, and those are the huge macro-imbalances in our economy. We were not the only country in the world with those imbalances, but they were worse here than anywhere else. Lord Turner put well it in his report when he said that""rapid credit expansion was underpinned by major and continued macro-imbalances, with the UK—like the US—running a large current account deficit"." The truth is our households were more indebted, our banks were more leveraged, our housing boom was greater and our Government budget deficit was larger than almost any other country in the world. The extraordinary thing is that the then Chancellor thought that this period was one of stability and an end to boom and bust. We are living with the consequences of that hubris today. It is why Britain is the last country in the G20 to still be in recession. So this Financial Services Bill is tinkering at the edges. We need to end the dysfunctional tripartite regime; we need a new system of regulation that puts the Bank of England in charge; we need to address the issues that the Governor of the Bank has raised; and we need an international regime better to protect taxpayers while ensuring that Britain remains competitive. Above all, we need to move from an economy built on debt and highly dependent on the success of financial services to an economy built on savings that is home to successful financial services and to other successful industries. This Bill cannot do that, and nor can this Government. That is why we need a new Government and, eventually, a new Bill.