Financial Services Bill

I completely agree. There have been issues about what happened. The question that I was working towards is: how do we put it right? Everybody agrees that things went wrong, and everybody agrees that when the crisis came, the tripartite authority did not manage to resolve the issue in a very clever fashion. We heard all the accounts and all the evidence is there in the reports. The primary issue was not so much that the people involved were having a bust-up, but that the speed, scale and unexpectedness of the collapse caught everybody by surprise. In particular, as soon as the collapse hit the public and they started the run on Northern Rock, a domino effect could have moved quickly through our financial services, had the Government not also moved quickly, which they did. They did so after the collapse of Lehman Brothers as well. Given what happened, how do we put things right? I do not see that as a huge party political dividing line; I see it as a matter of trying to work out a sensible way to deal with what was a huge problem. However, just to say, "The relationships are dysfunctional; therefore we have to abolish or change everything," as the hon. Member for Tatton did, is not something that I buy into. That was the bottom line of his arguments, and I simply do not accept them. A number of issues have to be dealt with or thought through before we start talking about dismantling the FSA—or rather, not so much dismantling it, but tacking it wholesale on to the Bank of England. First, there are serious conflicts of interest in having an organisation that uses the monetary policy tools that the Governor now has at his disposal, including quantitative easing, and that also supervises the banks. We could create Chinese walls and separations within the organisation, but given the importance of the subject and the order of the issues being dealt with, it is much better for those different functions to be more clearly separated. The second thing—it has grown out of the crisis and we have all had to learn about it—is that the public are now much more demanding about scrutiny and transparency. The hon. Member for Twickenham talked about the banks' obligations on lending rates, which have not been restored to what they were. I do not think that the public are going to accept that one organisation, although it has responsibilities to report to different organisations, is likely to have the most wonderful culture of openness and scrutiny by the general public. I do not think that it will provide the kind of openness that the public will demand for the next 10 to 20 years. I always remember the time when the Governor came before the Select Committee to talk about what was happening with Northern Rock. He spoke in terms of, "If only the Bank had been able to carry out a covert operation". I had visions of somebody with a big bag of cash running out of the Bank of England towards Northern Rock, and I wondered how on earth that could be done in the modern day and age. Just recently, of course, the Bank has managed to carry out such operations, which is quite remarkable. It is interesting that the debate then starts to be about where the public accountability, scrutiny and answering lies for what the Bank and others are doing with public funds. We need a structure that will allow us to answer those questions. Splitting the FSA into separate organisations will not help; it already has a culture of openness that will help it to provide better answers. Placing all the functions into just the Bank creates the problem that it might become too big an organisation. We have all talked it being too big and too important to fail and all the rest of it, but having one body deciding quantitative easing, interest rates, the education of the public, bank supervision, old Uncle Tom Cobleigh and all involves too many functions for one organisation. Most importantly—this explains my question to the hon. Member for Tatton, and both the Governor and the FSA said this—the issue is not just about who sits where but is about what they do. Although there has been much discussion about reorganising structures, we also need to discuss the new tools that can be used to fix the current problems. It is much better to improve the structures we already have and focus on getting tools—other than the capital ratios that everybody has talked about a great deal—to try to tackle the problems we are going to face over the next 10 to 20 years. Apart from that, there some very important measures in this Bill, which go right to heart of the public debate. People have talked about bankers' pay, which is a major public concern. There is also a real awareness of the importance of the international regulations. I was pleased to hear my right hon. Friend the Chancellor speak about them in his opening address. I was particularly pleased to hear what he said about the credit ratings agencies—some of the real culprits in all this when they went on advising people about putting together hopelessly complex products and provided ratings for them. That then encouraged people to sell them when they were, in fact, houses of straw. I also greatly welcome the measures on consumer protection, particularly on the credit card cheques, in respect of which many hon. Members of all parties have campaigned for extra controls. Nobody has mentioned clause 29, which I am particularly pleased to see in the Bill. It gives extra powers to the Financial Services Compensation Scheme. In all the disasters around financial services over the past couple of years, the Financial Services Compensation Scheme is just about the one organisation that has been extremely efficient and has managed to ensure with record speed that people have received the compensation owed to them. I am sure that the Financial Secretary will mention this in his concluding speech, but the clause would make it possible for the FSCS to ensure on an agency basis that all the customers of the Icelandic banks, for example, get paid out. That would mean that the money of overseas customers, or United Kingdom customers with accounts abroad, would be protected as well. I think that it would cover all internet banking as well, but perhaps my hon. Friend the Economic Secretary will clarify that point when he winds up the debate. In any event, it is a small but important measure. I welcome the Bill, which I think will provide a way through a difficult situation and will help to put the regulation of our financial services on to a more secure footing in years to come.