These are, as the Economic Secretary pointed out, momentous times for this country's banking and financial services industry, which has, as my hon. Friend Miss Kirkbride has just said, become an increasingly important element of the UK economy over the past two decades. It had importance before, but its status, and, indeed, the knock-on effect of any problems for other important commercial cities and towns in this country, let alone the City of London, should not be underestimated.
I believe that in an ideal world—perhaps it is fair to say that we are not living in an entirely ideal world—it is important that any legislation is not over-rushed. I appreciate that there have been tumultuous events in the financial markets, and I suspect that that will be so for some months to come. However, in so far as anything is foreseeable—I accept that some eventualities are not—we should avoid putting our banking industry into too much of a straitjacket.
I am also the first to accept, however, that the days in which both I and, indeed, my hon. Friend Mr. Hoban perhaps talked easily about the idea of light-touch regulation are done—at least, for now. I confess that even relatively sophisticated high-net-worth individuals—we have seen what has happened to such investors in one of the world's largest hedge funds in recent days—have to concede that those days will, I fear, come to an end.
As my hon. Friend the Member for Bromsgrove pointed out, the future for London's financial centre will not be enhanced by low-regulation arbitrage, vis-à-vis other financial centres going forward. Clearly, that will not be the spirit of the age for some time to come. I must confess that I am also concerned about the City of London's future role as a world financial capital. We must be entirely candid about the fact that some permanent damage has been done by recent events—indeed, the same applies to Wall street—and the whole Anglo-American model of financial services will need to be shaken up.
Clearly, the Bill plays an important part in that process, but we must regard this as work in progress in the weeks, months and, indeed, years ahead. That can only be further undermined by some of the unfolding scandals, and I am sure, I fear, that we have not heard the last of them. Nevertheless, I hope that the Government will take some heed of the quiet concerns of many people in the banking world. Many representations have been made to the Government during the consideration of the Bill, but although they broadly express support for the workings of the Bill, there are some concerns about how the compensation system will work.
I should like to reiterate the concerns of my hon. Friend Mr. Fallon, who hit the nail on the head. We must look at the whole issue of competition law. Above all, as we have seen with the banking mergers that have taken place and the lack of independence for some banks, there is concern that competition considerations have been flung aside. We are living in tumultuous and difficult times that are bewildering for the public and for policy makers as well; but equally, we must remember that competition law is enacted not as an added layer of regulation but to protect the consumer.
The bigger concern of many people is that smaller banking organisations and small organisations in the financial services world run the risk not only of perhaps over-contributing to a compensation fund, but of exiting from a lot of markets in the financial services world, simply because of those competition concerns. All too often, enhanced and enlarged regulation is a big barrier to entry for new competitors in what should be a vibrant field, full of innovation and flair.
My hon. Friend the Member for Fareham rightly pointed out that some specifics will be considered in another place in January in relation to netting and set-off in the context of clause 48, but I should like to say finally that, although this is billed as temporary legislation, there is no doubt that, as my hon. Friend the Member for Sevenoaks said in his contribution, many of these measures will stay in place for quite some time. That means two things: first, we clearly need to give very great consideration to what we put on to the statute book at this stage—that has happened here and will happen in another place in the next few weeks of the parliamentary Session—but, more importantly, we recognise that this must be work in progress. I hope that the Government will pay great attention to what is being said in the banking and related industries to ensure that, where unforeseen problems arise in relation to the legislation, they are fully and properly dealt with.
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