Financial Services Bill

The global financial crisis has led countries across the world fundamentally to review financial systems and their interaction with the broader economy. Last year and earlier this year, we ensured that the UK authorities had the power to deal with failing banks while continuing to protect consumers and taxpayers. Our economy needs well-managed, well-functioning banks and financial institutions to perform a vital set of functions, channelling investment and helping people to save and plan for the future. Although a prosperous financial sector is in everyone's interests, so too is a stable one. Through this Bill, we have an opportunity to strengthen the financial framework so that the UK not only addresses the effects of the crisis but harnesses the lessons of the past two years, ensuring that in future any crises will not only be less damaging but less likely altogether. The Government's aim is simple: to ensure that the financial system that emerges from the crisis is not only built on a stronger and sounder footing but is fairer and works for consumers. The tone of the comments made by the hon. Member for Fareham (Mr. Hoban) stood in stark contrast with those of the shadow Chancellor. I got the impression that the shadow Chancellor had thought deeply about this and that he disagreed with us on one fundamental issue to do with the structure of regulation, but agreed with large elements of the Bill. He said so. He said that recovery and resolution plans were a good idea and he supported lots of other elements of the Bill. However, I did not hear a shred of evidence to support the idea that the fundamental wholesale reform suggested by the hon. Member for Fareham would produce any benefits for consumers and investors. It is clear that when it comes to structure there is a fundamental disagreement between the Government and the Opposition. The Opposition have made their views on the institutional framework clear, but their suggestion that if we had handed the FSA lock, stock and barrel back to the Bank of England we would have prevented the financial crisis, or would prevent a future one, is simply misguided. Putting together responsibility for regulating not just the big banks but the small ones—the smallest building societies, individual financial advisers and the smallest credit unions—does not make strategic sense. Many different institutions and frameworks exist in different countries across the world, but no model of financial regulation has been successful in fully insulating any country from the crisis. The shadow Chancellor and the hon. Member for Fareham cited a number of people who support their view. We can do the same. The simple fact is that there is no perfect supervisory architecture. My hon. Friend the Member for Coventry, North-West (Mr. Robinson) quoted Andrew Large, who knows a lot about these matters. The solution, to my mind, is not to rearrange the responsibilities of those with a role to play in preserving financial stability, but to ensure that all responsible parties have the right tools at their disposal to maintain financial stability and that the right framework exists to ensure effective co-ordination of the authorities' activities. We should not be talking, as the Opposition are, about shifting the deckchairs. We should be talking about strengthening the deckchairs so that they can carry the weight that we all now realise is required of them. It matters not who does the job, but that the job is done effectively and the institutional framework is clear and coherent. At this critical time, we need the authorities to focus on reducing risk, not on having to deal with the disruption and uncertainty caused by unnecessary institutional upheaval. The hon. Member for Twickenham (Dr. Cable) made a valid point when he warned of the dangers that significant institutional upheaval could bring. Instead, by introducing the Council for Financial Stability, we propose a change from the existing standing committee arrangements. The council will be responsible for considering emerging risks to financial stability and co-ordinating an appropriate response by the UK's authorities. Most important, it will place financial stability arrangements on a more formal, transparent and accountable basis. A second crucial element of the Bill relates to recovery and resolution plans, or living wills.