Finance (No. 3) Bill

I am very happy to do so, Mr Gray. We are talking about a bank levy, and amendment 9 refers to"““the Government's analysis behind the rate and threshold chosen for the bank levy””." It seems to me that if one is to perform an analysis of the rate and threshold chosen, one has to understand how these things came about and the historical context. More importantly, one has to understand the regulatory context and what went wrong in the regulatory system. Much of the debate has been about that regulatory structure. I am seeking to address subsection (2)(a) proposed in the amendment. That is exactly the import of my remarks. As the hedge funds brought their pressure to bear, they identified the problem of the companies' overvaluation in the market. They saw that the structure of the bundled streams of security were not providing the security to the companies that the market believed they were providing. The hedge funds then short sold on those companies. That was an important regulatory failure. There was no uptake rule and no clear limit on the arbitrage window that was allowed for trading on such shares, so the short selling allowed the hedge funds to beat down the value of those financial institutions in such a way that there was a precipitation of the collapse of the credit that could flow through the financial institutions, which infected all the other companies in the stock exchange. That is how the situation became a global crisis. In addressing the analysis that the amendment asks the Government to engage in, I urge them to take seriously the regulatory failings at that time. [Interruption.] The Financial Secretary says from a sedentary position that those were the mistakes of the previous Government. What I am pointing out to him is that they were not simply mistakes made by the previous Government, but mistakes that were made on a global scale. The financial crisis started in the sub-prime market in the US, and that infected the global markets. The reason that it took hold in the UK, to the detriment of this country, was that we had placed an over-reliance on the financial markets and the financial sector as opposed to manufacturing and industry.