Independent Banking Commission Report

Michael Meacher Excerpts

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

The Chairman of the Treasury Select Committee makes a sensible suggestion. It is likely—I do not want to say certain—that we will need a separate piece of legislation on some of these specific changes to banking. However, I hope that we can also use the Financial Services Bill to implement other key parts of the reform. That is the case because we want to get this right. The draft Bill is currently being discussed by the Joint Committee chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), and we simply will not be able to produce all that detail in the next couple of months before the Bill is introduced. We have to get this right. As John Vickers said, short-termism got us into this mess, and we need a bit of long-termism to get it right. However, I hope that the commitment to legislate in this Parliament reassures people that it is going to happen in this Parliament. This bunch of Ministers, this Government, will be held accountable if we do not legislate in this Parliament. We have given a clear commitment, and I am sure that the work of the Treasury Committee, which my hon. Friend chairs, in looking at how this report can be put into practice will be very valuable.

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

Why effect a firewall between retail and investment banking—which is highly complex and which the banks will use every device to get round—rather than effecting a clean break, which provided 60 years of stable banking after the great depression? Why wait eight years to implement some of the changes, when that will continue to expose taxpayers to another financial crash and when the banks are still too big to fail?

[Mr Osborne]

One of the original purposes of creating the Banking Commission was to try to resolve the argument, which is held in this Chamber and elsewhere, about whether to split banks, ring-fence them or leave things as they are. In this report John Vickers goes through all the arguments for a complete separation of the banks and comes down on the side of saying that it would not be sensible. He thinks that the cost to the economy would be particularly high, and without any real stability benefits. He also thinks that there are circumstances where one would want a retail bank to be supported by the rest of the bank—the investment bank—and have money transferred into it, which would enhance stability. The third point, which will not be universally popular in this Chamber, is that such a separation would be almost unenforceable under European law, because other European banks—or, indeed, one of our banks that had moved to another European jurisdiction—could passport money in. For those three reasons, John Vickers does not think it sensible to split the banks up.