A pre-Christmas outbreak of cross-party harmony? (Not quite)

What should have been the big day in the spotlight for financial services regulation was rather overshadowed by the latest dictator to bite-the-dust in 2011.

But yesterday’s events were no less significant for having been shunted down the news agenda a notch or two. The Government response to the Vickers Commission’s proposals for radical reforms to the banking sector AND the report of the Joint Committee on the Financial Services Bill, all in one day.  My, Santa has been good to us this year.

The Joint Committee report is an excellent example of Parliament at its most effective. A cross-party group, comprising members of both Houses, coming together to deliver well thought-out, sensible critiques of the draft Financial Services Bill.

If their advice is heeded it is likely that the Bill will be significantly more fit-for-purpose than in its original form. Their recommendations for increased parliamentary scrutiny of regulators and increased competition in the sector are particularly welcome.

For just a moment, it seemed we may see similar cross-party harmony on the implementation of the Vickers reforms. Ed Balls stood up to respond to the Chancellor’s statement and stated that Labour members “are determined to play their part in implementing these proposals, as far as possible, in a cross-party spirit”.

But cross-party spirit from Ed Balls is a bit like openness and transparency from Kim Jong-il.

He moved quickly into rhyming off all the things the Chancellor ought to apologise for. Much more familiar territory for Ed B.

However, despite his typically robust rhetoric, Balls and Labour do broadly support the Government position in implementing the Vickers proposals in full. And they should not be shy in saying so.

Vickers’ central proposal – the ring-fencing of retail banking services from investment banking – is a major step in ensuring taxpayers will not be liable for bailing out failing banks. The UK is going even further on minimum capital requirements than the proposed international standard. And improved bank account portability could provide real consumer benefit.

Part of Labour’s task at present is to show that the lessons of the past have been learned. Light-touch regulation of financial services was a mistake. A big one. And point-scoring by pointing out that George Osborne wanted even less regulation, though satisfying, will not ultimately help Labour’s cause.

It is only by wresting back credibility on issues such as these that Labour will stand a chance of winning the wider economic argument.

It is vital that they do.

Simon works on financial policy at Cicero Group