Financial Services Regulation

Oral Answers to Questions — Prime Minister – in the House of Commons at 12:31 pm on 16 June 2010.

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Photo of Alistair Darling Alistair Darling Shadow Chancellor of the Exchequer 12:31, 16 June 2010

(Urgent Question): To ask the Chancellor of the Exchequer to set out his proposals for the future of financial services regulation and for the role of the Bank of England.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

In 1997, Mr Brown, as Chancellor, established, without any consultation and without telling Parliament, the tripartite system to regulate the financial system. In doing so, he removed from the Bank of England its historical role in monitoring overall levels of debt in the economy. It is well known that the late Eddie George was deeply unhappy with that decision. It is also well known that the tripartite system that the right hon. Gentleman created, and that his successor as Chancellor sustained, failed spectacularly in its mission to ensure stability in the financial markets, and the failure of certain banks cost the taxpayer a vast amount of money. Indeed, British taxpayers funded the largest bank bail-out in the world, and it was only in Britain that depositors queued in the high street to get their money back.

The British people rightly ask how this new coalition Government will learn from the mistakes of their predecessor. The coalition agreement commits us to reforming the regulatory system for financial services in order to avoid a repeat of the financial crisis, and that is precisely what we will do. First, on the structure of regulation, our plan is to hand over to the Bank of England the responsibility for macro-prudential supervision, which should never have been taken away from it. The tools for macro-prudential supervision are the subject of ongoing international discussions. We are playing a full part in that process at European and G20 level, along with the Governor of the Bank and the chairman of the Financial Services Authority. It is already clear that the tools will include capital requirements that work against the cycle, rather than with it.

The coalition Government are also committed to handing to the Bank of England responsibility for the oversight of micro-prudential regulation. It is clear that the central bank needs to have a deeper understanding of what is going on in individual firms. My hon. Friend the Financial Secretary to the Treasury will give further details of the institutional arrangements in a parliamentary statement tomorrow. It is important that the institutions involved correctly follow their own internal procedures before those arrangements are made public, and the Governor of the Bank will be talking to the court of the Bank this afternoon.

The coalition Government will also deliver on their promise to establish an independent commission on banking. The previous Government would brook no debate about the future structure of the banks, the relationship between retail and investment banking, and the questions of how best to protect taxpayers and how to ensure greater competition in an industry that they actively sought to consolidate. The previous Prime Minister did not want anyone to challenge his opinions, but we cannot ignore this debate about the future of banking-indeed, I want Britain to lead it. We will therefore establish the commission on banking to investigate those issues. It will be chaired by Sir John Vickers, who is a former chief economist at the Bank of England, was one of the first members of the Monetary Policy Committee and is a former chairman of the Office of Fair Trading. He is a man of unquestioned experience, integrity and independence who approaches this issue with an open mind. I am today placing in the Libraries of both Houses the terms of reference and we await the conclusions of the commission.

Unlike the last Government, this Government are prepared to confront the difficult challenges of the regulation and structure of the banks. We are prepared to learn the lessons of what went wrong, even if they were not.

Photo of Alistair Darling Alistair Darling Shadow Chancellor of the Exchequer

I am grateful to the Chancellor for that answer, and I wonder whether I might press him on a number of points. First, he says that the Bank of England will have responsibility for macro-prudential supervision, but he also says that the debate as to what macro-prudential supervision consists of is still up for grabs as it is still being debated internationally. When does he expect those discussions to be concluded?

The Chancellor also says that the Bank of England will have some responsibility for micro-supervision. It has been suggested in some quarters, for example, that the Bank of England, rather than the FSA, might have dealt with whether the Royal Bank of Scotland could take over ABN AMRO. Does he not realise that far from clarifying the situation, this is adding another complication? The risk is that we will have a dog's breakfast of a regulatory system in which no one knows who is making decisions and no one knows who is in charge. Does he not accept that at a time when there is still a great deal of uncertainty in the banking world and a great deal of turbulence, the last thing that we want is a situation in which it is not clear which organisation is responsible for precisely which activity? If both the Bank and the FSA are responsible for regulating institutions, that is bound to lead to confusion and inevitably runs the risk that mistakes will be made.

Will the Chancellor also tell us whether, in relation to the Bank of England's responsibility, he is planning any reform to the financial stability committee or any internal reforms so that a committee will advise the Governor? If that is the case, will the Governor be making those decisions or will a committee do so, perhaps on a wider basis? Will he also tell us whether or not Lord Turner, the chairman of the FSA, agrees with his proposals and whether he is now prepared to serve, in effect, as a deputy under the Governor of the Bank of England?

In relation to the proposal to break up banks, will the Chancellor explain how Northern Rock, which was a very simple retail bank on the face of it, would have been saved from collapse simply by virtue of the fact that it was a retail bank and not an investment bank? Will he also explain how his proposal would have made any difference to Lehman Brothers, which did not take a single retail deposit but was a complex investment bank that collapsed with calamitous consequences? Will he tell us, too, whether the commission that he proposes to set up will consider the break-up of British banks such as Barclays or HSBC? Will he tell us how the uncertainty that will inevitably be caused by the work of the commission will help to rebuild the financial stability that we want? At a time when there is that instability, does he not think that it would be far better to keep the FSA working on what it is supposed to be doing-that is, the day-to-day supervision and regulation-bearing in mind that some small minor decisions are sometimes very important, especially if they are the wrong ones?

Is it not the case that the proposal was made in the first place because the right hon. Gentleman was looking before the election for a dividing line between him and the then Government? What we have today is something that has been cobbled together, that is ill thought out, that will add to uncertainty and that runs a grave risk that further mistakes will be made with catastrophic consequences in the future.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

The dividing line is between a Government who want to learn the lessons of what went wrong and an Opposition who have no intention of learning from all the mistakes that they made in office. I find that striking.

The right hon. Gentleman talks about a dog's breakfast. What about the dog's breakfast of the tripartite system that allowed the Royal Bank of Scotland to fail and that allowed Northern Rock to fail? He was the Chancellor at the time and he completely failed to see the growing levels of debt in the economy. He and the institutions that were created by his predecessor completely failed to see what had gone wrong in individual institutions. The thing I find extraordinary-perhaps Opposition Members will reflect on this-is that their shadow Chancellor is setting them against reform of the regulation of banks and reform of the structure of the banking industry. That is what he has just done. What we are going to do is to have an open debate about the structure of banks. That debate is happening in the United States of America, in the newspapers of this country and in parliamentary debates here. The only place it was not happening was in the last Government under his chancellorship.

We think that the sensible approach, in order to resolve these issues-[Hon. Members: "Answer the question."] I am answering the questions-every single one of them. We think that the sensible approach is to set up an independent commission under Sir John Vickers to examine these issues and to take into account the different, strongly held views. For example, John McFall, who was the Chair of the Treasury Committee in the last Parliament, has in recent days put his name to a report that calls for structural reform of the banks. The shadow Chancellor might want to ignore his views, but I want to listen to them and to take them on board as part of an independent commission, and that is exactly what we are going to do.

When it comes to the international context, I think that all of that will enable us to lead the debate. Of course, we have to agree this at an international level, where some of the macro-prudential tools are. As the shadow Chancellor knows, there is a debate taking place in the G20. We hope, in the Seoul summit in November, to have come to firm conclusions on the capital, liquidity and leverage requirements. When we have come to those agreements and when we have international agreement on what those standards should be, we will need a regulatory system here, at home, that is fit for purpose, so that they can be implemented.

Photo of Peter Tapsell Peter Tapsell Father of the House of Commons

As one of those who strongly opposed the introduction of the tripartite regulation of our financial institutions as soon as it was announced in 1997, may I congratulate the Chancellor on getting rid of the FSA, which has been a major contributor to the disasters in the economic sphere in recent years and which was regarded in the City, throughout the whole of its lifetime, as a thoroughly inefficient organisation?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

To be fair to the FSA, it has been rather candid about the mistakes that were made when the shadow Chancellor was the Chancellor and when the former Prime Minister was the Chancellor. We have to learn from those mistakes. As I have told the House, we will set out the details of the institutional arrangements in a parliamentary statement tomorrow.

Photo of Rachel Reeves Rachel Reeves Labour, Leeds West

The Chancellor talks about breaking up the retail and investment banks, but the immediate challenge for the Government is the future of the nationalised banks. Will he consider turning the failed banks into mutuals that focus on long-term returns and not on short-term profits?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

We need to take some time before coming to decisions on how to dispose of the bank shares that we own in the Royal Bank of Scotland and Lloyds, and the banks we own, such as Northern Rock, not least because at the moment the British taxpayer would make a substantial loss on many of those share purchases. However, we are prepared to consider lots of options. Sir John Vickers' commission is going to look at competition in the banking industry. It has become incredibly consolidated in the past couple of years and that is not necessarily the best thing for bank customers, as many of us will know from representing businesses that cannot get access to credit. It is sensible to look at what Sir John Vickers and his commission have to say about this.

Photo of Andrew Tyrie Andrew Tyrie Chair, Treasury Committee, Chair, Treasury Committee

Why was so much of this announced on this morning's "Today" programme rather than here? Who will chair the financial stability committee in a crisis? Will it be, as it should be, the Chancellor of the Exchequer?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

There has been quite a lot of speculation, and as we will see in the coming days not all of it has been very accurate. I cannot account for the speculation, because it certainly has not been coming from my office. I am discovering that it is a feature of being in government that lots of people anticipate one's views before one expresses them.

I congratulate my hon. Friend on becoming Chair of the Treasury Committee and I hope to have the engagement of his Committee in this important debate over the next year. When it comes to the commitment of taxpayers' money, the elected Government, who are accountable to the House, will remain in charge.

Photo of Keith Vaz Keith Vaz Chair, Home Affairs Committee, Chair, Home Affairs Committee

The Chancellor will know that the FSA was created following the closure of BCCI on 5 July 1991, and the publication of the Bingham report. Nineteen years later, some of my constituents are still waiting for all their money back. I think the Chancellor knows that I am about to ask the same question I have asked every Treasury Minister over the last 19 years, so in the spirit of open government, will he do something that the former Chancellor would not do and please publish the confidential parts of the Bingham report so that we can have a proper debate about the issue?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I think everyone would acknowledge the work the right hon. Gentleman has done on the issue, over many years, on behalf of his constituents and other people who were so badly affected by that scandal. I was of course present at the exchange between him and the shadow Chancellor about the publication of the secret Bingham report-if I can put it like that-and I have asked for urgent advice about that and for a copy of the report so that I, too, can read it.

Photo of Matthew Hancock Matthew Hancock Conservative, West Suffolk

In a similar exchange in a debate last week, did my right hon. Friend hear the shadow Chancellor say that the former Government did not understand the systemic risks in the banking system? Does he share my surprise that Members on the Labour Front Bench are no longer willing to engage in an argument about putting right the system of banking regulation that so spectacularly failed?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I am surprised, and I am not sure whether the shadow Chancellor is committing his party for the rest of this Parliament to be against reform of the structure of banking. I see quite a lot of heads shaking, so perhaps he is not. We shall wait and see. It is worth noting that on 8 June Lord Young of Norwood Green, a Minister at the Department for Business, Innovation and Skills in the last Government, referred to

"the tripartite relationship that was supposed to identify and regulate the systemic risk in British banking-a relationship that we all know failed somewhat spectacularly."-[ Hansard, House of Lords, 8 June 2010; Vol. 719, c. 630.]

Photo of Andrew Love Andrew Love Labour, Edmonton

Given the continuing difficulties in the banking sector, does the right hon. Gentleman accept that the proposals he is putting to the House today will lead to greater uncertainty and greater blight in the financial services sector, and make it more difficult for banks and financial institutions to recover?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

No, I do not accept that. We cannot ignore in this House that a debate is raging not just in our country but across the world about the structure of the banking industry and the best way to regulate it. The hon. Gentleman may have decided that he has all the answers and the Labour party may have decided that the system it established 13 years ago was the right system and we should stick with it, but I think we should be more open. We should have a process that brings that debate to a conclusion. Tonight I am going to the Mansion House dinner, as I believe the shadow Chancellor is too. I have sat at Mansion House dinners as shadow Chancellor and listened as the Governor of the Bank of England said something completely different from what the Chancellor of the Exchequer said on the same occasion. We have to resolve the debate, so we have to set up a process that resolves it, and I believe that an independent commission in which everyone can engage, including Members of the House, is the right approach.

Photo of Malcolm Bruce Malcolm Bruce Chair, International Development Committee, Chair, International Development Committee

I welcome my right hon. Friend's approach. Does he acknowledge that it is not just the architecture of the regulation but its quality that has conspicuously failed? It may be understandable that the Labour party wants to defend its creation of the FSA, but do Labour Members not acknowledge that it actually failed? For many people, it too often protected the providers of services and not the consumers who were actually investing in them.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My right hon. Friend is absolutely right. The overall objective is to move away from a process of regulation that is simply about ticking boxes to one where more judgment is exercised and people start to ask those such as Sir Fred Goodwin, "What are you doing with your bank? Is it right that you are taking over ABN AMRO?", instead of asking him whether he wants a knighthood.

Photo of Chris Leslie Chris Leslie Labour, Nottingham East

Can the Chancellor explain who will be responsible under these reformed arrangements for the regulation of derivatives-financial instruments that are obviously sometimes very opaque and complex and could present a major risk to our financial system? Is it the Bank of England, the FSA or the Treasury?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

The details of the institutional arrangements will be set out in a parliamentary statement tomorrow. As I said, it is right to allow the institutions involved to conduct their internal procedures, such as speaking to the court of the Bank. I know it is a completely novel idea not to bounce every institution in the country into the decisions the Government take, and actually to allow a proper process to take place, but I happen to believe that that is the right approach. The serious issue of the regulation of derivatives is the subject of intense international debate to try to create a better regulated system-or indeed to provide regulation where none existed-and to provide some central clearing operations for derivatives so that we can avoid some of the systemic risks that built up in recent years.

Photo of Nadhim Zahawi Nadhim Zahawi Conservative, Stratford-on-Avon

Does the Chancellor agree that the previous Government's idea of regulating our banks was to have a midnight cocktail party, where they twisted the arm of the chairman of Lloyds Banking Group to take over HBOS?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Indeed, my hon. Friend is right: certainly, if the accounts are true, that was the approach taken by the former Prime Minister. I am not sure whether he did so with the knowledge of the former Chancellor, but I guess that we have to wait for the flurry of memoirs to find out.

Photo of Mary Creagh Mary Creagh Opposition Assistant Whip (Commons), Shadow Minister (Health)

This weekend, there was an advertisement for a pay-day cheque service that had an interest rate at the bottom of the screen of 236%. Given that the Chancellor is about to make changes to the FSA's consumer protection function, does he think that 236% interest is fair, and if it is not, what will he do about it?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

The OFT will shortly publish a report on high-cost credit that will address some of these issues, and the hon. Lady is absolutely right to be concerned about them. One of the things that I hope will flow from the institutional arrangements that we are putting in place is a stronger voice for the consumer to ensure that particularly the most vulnerable people in our society are protected from exploitation.

Photo of Claire Perry Claire Perry Conservative, Devizes

Will the Chancellor assure the House and the country that he will never display the sort of complacency so aptly demonstrated by Mr Brown, who said in 2007 that we were entering a golden age of prosperity in the City of London?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend is right. I was sitting in the Mansion House when the former Prime Minister, with great prophecy, announced that we were embarking in the summer of 2007 on a new golden age for the City of London. Unfortunately, as with everything else that was golden that the previous Prime Minister touched, that turned to lead.

Photo of John Mann John Mann Labour, Bassetlaw

What systemic risks specifically created the collapse of Lehman Brothers, and how does the Chancellor intend to regulate the top 10 large investment banks and protect the British economy against such collapses?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Suddenly, the hon. Gentleman is interested in the regulation of Lehman Brothers, but there we go.

The risks were pretty clear. No arrangements were in place for winding up a large and complex financial firm. That was one concern. No arrangement was in place that would allow a global firm to avoid dying nationally in the way that it did. It was heavily exposed to, for example, the derivatives markets and other things. That had not been spotted either by the British regulator or, of course, the American regulator, which was in the lead. We need to investigate precisely that kind of issue, not just here in Britain, but across the world. That is being done in the international councils on which we sit. But surely, whether with Lehman Brothers, the Royal Bank of Scotland, HBOS or Northern Rock, we must learn the lesson of what went wrong. Again, I find it breathtaking that, at the beginning of the Parliament, the Labour party has set itself against changing the system of regulation. [Hon. Members: "No we haven't."] Labour Members may say that, but that is exactly what the shadow Chancellor did about 53 minutes ago.

Photo of Chuka Umunna Chuka Umunna Labour, Streatham

My understanding is that the credit rating agencies are not subject to any proper UK regulation at the moment and that some action is being taken at EU level in that regard. Does the Chancellor see any place in the new arrangements for UK regulation of the credit rating agencies, which, of course, bear a large responsibility for what happened in the sub-prime crisis?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

The hon. Gentleman is right to draw attention to the role of the credit rating agencies. Of course, all sorts of organisations and products received triple A ratings that they should never have received. That triple A wrapper basically made them immune to investigation by the firms that were buying those products. Certainly, we need to improve the regulation in the domestic sense-here in Britain-but that is also the subject of decision at a European level, and the la Rosière proposals on European supervisory agencies will consider in particular the role and regulation of credit rating agencies.

Photo of Sajid Javid Sajid Javid Conservative, Bromsgrove

Will my right hon. Friend commit to ensuring far greater scrutiny of EU regulation concerning financial matters than the previous Administration ever did, to make sure that it helps, rather than hinders, our banking system?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend makes a very good point that we must get the European regulation right, and the United Kingdom has a particular role as the location of most of the wholesale financial services in Europe. We therefore bring some insights to the table, which not all other members of the European Union can do. I am clear that we must do that. It will be under discussion at the European Council later this week and, I suspect, in pretty much every ECOFIN meeting for the rest of the year.

Photo of Jonathan Edwards Jonathan Edwards Plaid Cymru, Carmarthen East and Dinefwr

As a part of these reforms, will the Bank of England consider unemployment when determining interest rates?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

The Bank of England has an inflation target, and I am not proposing to change the inflation-targeting regime.

Photo of George Freeman George Freeman Conservative, Mid Norfolk

Thank you, Mr Speaker, for calling me before I have made my maiden speech. For the record, this is not it. [ Laughter . ]

Given the gravity of the situation in which the last Government have left the finances, does my right hon. Friend the Chancellor agree that it behoves all parties to work together on this? Will he confirm whether he has received any positive contributions from Opposition Members, or whether, as it appears to Conservative Back Benchers, they are now reclined into abject criticism?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Well, it was a very good maiden intervention by my hon. Friend. I find it strange that the Labour party does not want to engage in this debate. One would have thought that the Labour party was interested in how banks will be regulated, in how we learn from the mistakes and what went wrong, and in the structure of banking in the future, but the shadow Chancellor has set it against that. However, individual Back-Bench Members of the Labour party will probably be more interested in this than their Front Benchers. Of course, by setting up an independent commission and, indeed, by having the debate in the Treasury Committee and on the Floor of the House, those contributions will be heard.

Photo of Toby Perkins Toby Perkins Labour, Chesterfield

The Chancellor says that he is keen to learn the lessons from the economic problems that happened. Is one of those lessons that he was wrong to say that the Government should have let Northern Rock fold?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

What I said about Northern Rock was that we should have found a way to have a Bank of England-led reconstruction of that firm. The previous Government then introduced legislation in Parliament that would have allowed that to happen in the future. That is exactly how they proposed to handle future bank failures. [ Interruption. ] The shadow Chancellor says that we voted against it. We did not vote against the Banking Act 2009, by which he introduced the procedures for a Bank-led reconstruction. He continues to shake his head. I seem to remember that I went to his office in the autumn of 2008, pledged my support and delivered on that support.

Photo of Nicky Morgan Nicky Morgan Conservative, Loughborough

As someone who worked with the FSA before I was elected and had to plough through many long consultation papers and then try to help business to understand them, may I perhaps suggest to the Chancellor that the people who are working at the FSA are not the right people to be transferred to the Bank of England and that, in fact, we need people who understand the risks and working in the City of London, rather than those who have just read textbooks about that, as many of the people in the FSA appear to be?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Of course, it is important that we have the right people doing regulation. The FSA made mistakes, and it has been very candid about them. Lots of institutions made mistakes in the build-up to the crisis-including, of course, the British Government. The people at the FSA have worked incredibly hard in the past couple of years, and I should put on record my tribute to the work that they have done. As for the institutional arrangements that we will put in place, there will be a parliamentary statement tomorrow.

Photo of Steve McCabe Steve McCabe Opposition Whip (Commons)

Will the changes that the Chancellor envisages have any impact on the bonus culture at the FSA? I understand that it cost us a record £22 million and reached 84% of its staff last year, at the very time when it was calling for curbs on bank bonuses.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I remember that at the time I, too, was surprised by the FSA's decision. If the hon. Gentleman will allow me to say this, those questions are best asked once we have made clear what the new institutional arrangements are. Then we can get on to the pay and rations.

Photo of Harriett Baldwin Harriett Baldwin Conservative, West Worcestershire

Does the Chancellor agree that it is surprising to hear Opposition Members talk about Northern Rock as a shining example of micro-regulation, when the FSA's own report into Northern Rock said that the ARROW process gave it far too low a ranking and that that such decisions would have been better taken in the home of the lender of last resort?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend makes a very good observation. Let me make a broader observation, if I may. She has enormous experience of the financial services. There are Members on the Opposition Benches with real experience as well, including Rachel Reeves, who used to work in the Bank of England. I would like that experience to be brought to bear in the process over the next year. We have decided not to resolve the issues in the Treasury, in the Department for Business, Innovation and Skills and in No. 10 Downing street, as we could have done. We have decided to have an open commission to which all Members can contribute and with which they can all engage. I think that is a better way to make policy.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

Has the Chancellor taken the opportunity to review the Official Report of the Committee stages of the Financial Services and Markets Act 2000 when the FSA was being set up? If so, does he recall that the constant cry from the Conservative Benches in those days was for lighter-touch regulation? Will he take the opportunity to say unequivocally to the City that, as far as his party is concerned, the era of lighter-touch regulation is over?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My right hon. Friend Mr Lilley was clear about the risks of creating the tripartite system when he was the shadow Chancellor who opposed that legislation. When it comes to light-touch regulation, let me quote what the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath, said in 2006:

"I will be honest with you, many who advised me, including not a few newspapers, favoured a regulatory crackdown. I believe that we were right not to go down that road".

I am afraid that the regulatory approach taken by the Labour Government when they were in office completely failed, and we will learn the lessons of their mistakes.

Photo of Guy Opperman Guy Opperman Conservative, Hexham

Does the Chancellor agree that the Opposition, who sold the gold so wisely and then bought euros, prophesied a golden age and then brought the economy, like a ship, on to the rocks, are not qualified to give us financial advice and seem to have such a poor memory?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I agree with every word that my hon. Friend said.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

May I declare an interest, as I am regulated by the Financial Services Authority? Does the Chancellor agree that boom and bust is part of the human condition, we will never get away from it, and the best that regulation can do is ameliorate extremes, not stop boom and bust altogether?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I am not sure whether the Labour party in opposition will keep its promise to abolish boom and bust, but it proved pretty disastrous in government. All of us welcome the fact that my hon. Friend will no longer be regulated by the FSA, and instead will be regulated by the Whips Office.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

Despite some high-profile casualties, does my right hon. Friend recognise the importance of building societies and mutuals to the financial services sector? What steps does he propose to take to encourage that sector to increase?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend is right that building societies and mutuals have an important role to play in the future. We want to strengthen them and support those who want to create mutuals. We will set out the details of how we will do that in the next few weeks.