Banking Reform

Jonathan Edwards Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Chuka Umunna (Streatham) (Lab)]

I, too, congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on initiating this important debate. I welcome the fact that we are conducting it in a reasonably non-partisan way. I have listened with interest to the comments of my fellow Treasury Committee members, and the last three contributors in particular. Although I do not agree with everything that has been said, there is much common ground.

My general approach is that we should not set out to destroy the City. It makes a valuable contribution to our economy, not least to the tax take of the Exchequer. I spent much of my legal career working there and I know that a number of other Members present also worked there for some time. The important thing is that we reform the City so that it is run in the interests of all the British people, not in the interests of a few people in the square mile, as often seems to happen. Above all, let us reform it so that never again do any of our constituents have to pick up the tab for the mess in the sector.

We should be clear. All major political parties and Governments across the world bear responsibility for allowing what happened to develop. Let us face it: the consensus pre-crash was for a light-touch model of regulation. However, we should not forget—this is where I differ from some other Members—that it was ultimately the bankers who were to blame. Now we have to resolve what happened.

I disagree with the motion in that it suggests that nothing much has happened. I am glad to hear that other Members disagree with that. Let us look back to the G20 in April 2009 and recall what was achieved there, following the leadership demonstrated by the former Prime Minister. I remember him being ridiculed as he went around the world trying to galvanise consensus on a set of outcomes, but the summit produced outcomes that have been built upon. Three come to mind. First, the leaders resolved to establish the Financial Stability Board, the successor to the Financial Stability Forum, and as a consequence the world has a standing body of Finance Ministers, regulators and central bankers, which seeks to provide early warnings of financial risks and has a greater mandate to promote financial stability globally.

Secondly, the leaders who attended the summit took concerted action to improve the quality and quantity of capital in the banking system, and I endorse the comments of the hon. Member for South Northamptonshire (Andrea Leadsom), one of my Treasury Committee colleagues, because what came out of it—with the FSB and the Basel Committee on Banking Supervision working together —helped to produce more stringent capital adequacy requirements and the minimum equity requirement will go up to 7%. Perhaps it is regrettable that that will not happen until 2019, and perhaps it could be sped up, but it has definitely made a difference.

Thirdly, the leaders resolved to endorse and implement new principles on remuneration, and, as a result, in the March Budget the former Government put in place the apparatus within which a remuneration disclosure scheme could be enacted.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Does the hon. Gentleman agree that, if there is greater transparency on bonuses, the threatened diaspora of bankers will be nothing more than hot air?

[Mr Umunna]

The apparatus would help to introduce greater transparency on bonuses, because if we want to do something about reckless remuneration we need to know about it. I speak to many people in the City, and, although some of course disagree with the measure, many accept that it needs to be introduced. Action was taken, but some measures are still outstanding.