I agree with my hon. Friend's concept of a self-regulating body, the courts and certain criminal aspects. We are dealing with a structure, which the Labour party would like to see, within which the Department of Trade and Industry eventually has full responsibility with a self-standing commission. Below that level there is a series of self-regulating bodies.
Financial collapse always accompanies economic collapse, as we have seen from 1929 in the United States, through to the collapse of the second mortgage specialists and the secondary banks in 1974–75, to which the hon. Member for Selly Oak referred. The hon. Member for East Lindsey made an excellent dissertation on how that collapse occurred because of the Government's legislation and documentation in 1971 on competition and credit control. That led to a massive increase in the money supply and, therefore, to the bust of 1973.
Those of us with knowledge of the City will recall 17 December 1973 when credit controls were ruthlessly imposed by the Chancellor of the Exchequer, leading to the collapse of the second mortgage specialists and the secondary banks. In 1981 a series of City brokerage firms collapsed. Those collapses led to the Secretary of State for Trade and Industry undertaking the review that we are debating.
The Opposition have no interest in financial, let alone economic, collapse. What has happened before can happen again — to an even greater extent if the Government persist in believing that the market is a law unto itself and does not need to be overviewed in the national interest. That market does not operate on what is real; it operates on what it perceives to be real, and because of the power of the market, such perceptions become self-fulfilling prophecies.
The fact that the Government are seeking at present to talk themselves out of a financial crisis will be of no consolation to people who see the markets talking themselves into one, and coming pretty close to demanding by their actions a series of public expenditure cuts, beginning with local authority capital spending cuts, to satisfy the markets' version of reality.
The Labour Opposition have not entirely abandoned hope of ever seizing again the commanding heights of the economy and requiring for that purpose an appropriately regulated City of London. We believe, therefore, in a securities commission with executive, judicial and delegated legislative powers, as described by my right hon. Friend the Member for Bethnal Green and Stepney. Those executive, judicial and delegated legislative powers would cover the whole of the securities industry.
Professor Gower has rightly pointed out that we would not be alone in that. I have already referred to the United States securities commission and similar institutions which have been set up in Canada and Australia. There are, of course, similar institutions in France and Belgium, our Common Market partners. That does not mean that we should abandon the present self-regulatory bodies—the Stock Exchange Council, the Panel on Take-Overs and Mergers or the Council for the Securities Industry. We recognise that there are enormous practical difficulties in bringing the diverse investing institutions and markets under direct statutory regulation.
The Labour party has accepted—its own report of the financial institutions study group says so—that it would be exceedingly difficult to define different activities tightly enough to ensure that those activities were separated to eliminate conflict of interest, and that the interpretation of the statutes and their application in particular cases would be constantly open to challenge in the courts.
My impression, as I read the Gower report, was that Professor Gower was dying to say that there should be a self-standing commission. In his recommendation, he consistently holds back from saying so forthrightly, contenting himself with a wink and a nod, possibly because he was not clear what the Government wanted. The Secretary of State was sufficiently opaque as to what the Government want. We hope that if there is opaqueness in relation to what the Secretary of State is thinking, he will rely upon the House to assist him in that thinking, and that this debate will be a constructive and worthwhile contribution to what happens to the securities industry of the City of London.
If Professor Gower were bold enough to widen his remit, not just to advise on the need for new legislation, but to prepare it, he should also have been more forthright in saying that he wished to have a securities commission.
It is difficult to see how the Council for the Securities Industry could retain its role as an umbrella and co-ordinating body of self-regulating agencies if a self-standing commission with a responsibility to the Department of Trade and Industry is to be set up.
Should the CSI be expanded along the lines recommended by Professor Gower, there may never be a self-standing commission. That would be detrimental to the City as a whole and detrimental to those markets which are not covered by the CSI and which may not have any satisfactory self-regulating bodies of their own. We know that at present the CSI is made up of users and practitioners of the securities industry. The professor has perceived that danger because he has declared that all the rules would be less vital if it were decided to establish a self-standing commission.