Financial Services Bill

My Lords, we disagree with both the analysis and the prescription that the noble Baroness has just given. In terms of the analysis, she places a pretty large burden on the tripartite arrangement—the architecture for the problems which we faced in the UK—and yet she said that the Chancellor was not interested in the asset bubble. From evidence that he gave when I was a member of the Economic Affairs Select Committee of your Lordships’ House, we know that the Government did not believe that the Bank of England should worry about asset bubbles either. Let us suppose that, at that stage, only two bodies were responsible for supervising the macroeconomic financial situation—a Chancellor who was uninterested, and a Government who did not believe, that the bank should be worrying about bubbles. Would that have changed the way that matters went? No, it would not. The Government and regulation were caught up in the bubble just as much as the banks were. Therefore, to argue for the collapsing of three into two, when the heads of the two were not interested, as the noble Baroness has just said, seems not to be an effective analysis of why we got into the mess that we did. As for the prescription, my question for the noble Baroness and her colleagues who are going to speak is: why, when I go and have meetings and dinners in the City or meet people who work there, do at least three-quarters of them not believe that this is an effective change and believe that it is merely changing the name plate on the FSA’s door? That is the reality of this. I know that the noble Baroness and some of her colleagues, such as George Osborne, believe firmly that this will be an effective answer, but they are in a minority in the City. This seems to me, as someone who does not work in the City but observes it and talks to people in it, to be a serious flaw—it is going to be a problem for her party. No one can claim that the tripartite system worked well, or that any system anywhere worked well. As the noble Baroness said, the success or failure of the system cannot be correlated with any financial supervisory architecture. We agree. The key thing that has changed, and that needs to change, is the attitude of the people at the top. The shock that they have been given by this terrible collapse will mean that their attitudes are now very different from those that they adopted before. Those attitudes are not coloured in the slightest by whether they are part of the FSA, part of the Bank, part of a duopoly running the system or part of a tripartite arrangement. It is a question of experience and changing attitudes. The best hope for an effective regulatory system is the shock that they have had in terms of the way that they manage their regulatory affairs, rather than the structure in which they operate.