Tough times like these test our character and values as a nation. So even in a recession, we have to act now, both to protect people from the downturn and to prepare and equip ourselves for every future challenge. The problem is that Gordon Brown did nothing to protect the economy for a possible downturn, whilst he was Chancellor, so is now asking us to have faith in him, even though the depth of this economy's recession can be partly traced to him.
Our future lies in low-carbon, high- technology manufacturing and services. Hence our investment in science, green jobs, skills and the digital backbone on which the rest of the economy depends. That is why we reject the idea of cutting spending now. But at root, the competitive edge that we need in the future requires an effective flow of credit through a reformed and more responsible banking system. By saying that our future lies in "low-carbon, high technology manufacturing" you are basically saying that traditional manufacturing, cars etc, has no place in our future. In addition, by going on a spending binge all you are doing is creating a debt nightmare for future generations, and all this coming from the man who claimed his "prudence" at every budget while he was Chancellor. But at root, the competitive edge that we need in the future requires an effective flow of credit through a reformed and more responsible banking system."A reformed and more responsible banking system" isn't that just an admission that the regulation of the banking system, ie. YOUR tripartite system has failed to prevent this?
I understand and share people's anger towards the behaviour of some banks. But anger on its own does not offer us a solution. The anger is not only at the banks it is also aimed directly at you, just one look at the polls will tell you that. Instead, Britain needs to lead the world in reforming and restructuring our banking system. Yes, we do need to be seen to lead the world, but your experience of a failed tripartite system is hardly a good reference to have on your CV now is it?
The basic functions of a bank are very simple - to provide a place where people can keep their savings safe and to provide funds for those who want to borrow to invest. But it is to meet these objectives in a new world that we must make changes both in the banks themselves and their regulation. I will keep referring to the tripartite system as that was your system of regulation, so are you yet again admitting to its failure?
Banks must act in the long-term interests of their shareholders and therefore of the economy as a whole, not in the short-term interests of bankers. That has to be the foundation on which a new system must be based. Considering that the majority shareholder of a number of banks is the government it is hard to see how this will ever be achieved. This starts with a rejection of the old short-term bonus culture. So, starting last week with RBS, we are changing the bonus system in the industry - with long-term incentives and claw- backs if future performance is poor. You only acted when the headlines become unbearable.
Another intrinsic part of the foundations must be better governance of banks. Because the tripartite system was a great success (sarcasm-Ed). Their boards must have the expertise and power to challenge management and they must be able to understand the risks the company is taking. If only Gordon realised the risks were being taken because his regulation system allowed it, and he spent the profits of those risks.
So David Walker's review will look at whether board members have the necessary expertise and the right incentives to monitor executives. We also need both better national and global regulation. For example, where banks are speculating, long-term capital requirements will have to be higher. All markets and all jurisdictions that want to benefit from the global economy should play by the global rules. Institutions with global reach should be regulated in a global way, not by a patchwork of national regulators. Again you are trying to blame everything on the US. Yes, the credit crunch started there, but the depth of our recession is being caused by YOUR actions here, and as for regulators, how anyone will take you seriously when your own system failed is beyond me.
But as we design this new regulatory system, we have to be clear as a nation about what we expect from our banks and clear, too, about how people, who depend every day of their lives upon banks, expect these vital institutions to be run. For, distant as the relationship between banker and client has become, the restoration of trust, the most precious asset of all, to the heart of that relationship must now underpin all that we do. Trust! Something that the electorate no longer has with you Gordon.
This should not be at the cost of Britain hosting big international banks. There is no room for parochialism or protectionism in our model of the future. Global financial flows and liquid capital markets have brought massive benefits to our economy since the dawn of global trade centuries ago. We are not evacuating, but rather entrenching, our place right at the heart of global commerce, finance and trade. With what exactly? thanks to you this country has no assets left, and a credit line worse than McDonald's!
A central problem we now have to deal with is that in the last year Britain has lost significant lending capacity from both foreign banks and lenders who relied on finance from the global capital markets now frozen over. Alongside thriving international and investment banking sectors, we need to ensure that the UK banking system that emerges over the coming months is refocused on providing strong competitive banking for domestically focused businesses, including start-ups and entrepreneurs, as well as mortgages for those who want to buy a home. In short, we need stronger business banks, mortgage banks and savings banks. Although what we have at the moment is a part nationalised mess, all caused by you and your Government.
We do not envisage, as some have advocated, a rigid divide in future between "narrow banking" - retail and corporate deposit taking - and investment banking and trading conducted at an international level. But while no one is advocating a retreat to single-purpose, nationally focused banks, we do want to see the reinvention of the traditional savings and mortgage bank in Britain, for loans to be made on prudent and careful terms, not just to people with large deposits, but to first-time buyers and those on middle and modest incomes who wish to buy their home but who have not been able to save a huge deposit. So for all of your bluster at changes to the system, you are advocating that there won't be any. In other words, you don't know how to solve this crisis at all.
We have got to get the balance right between serving home owners better and encouraging responsibility in the housing market. This is a duty on banks and building societies, but we have also asked the Financial Services Authority to look at how in the future we should control new mortgages for more than 100% of house value. If the FSA (your FSA Gordon) had been doing their job in the first place they should have been regulating this type of lending. Their inaction is systematic of the brief that YOU gave them when you set up your monitoring system. It failed, and now we are all paying the price.
Banks need a clearer focus on making loans to UK businesses so that they can grow and take on more staff. In order to get lending going, we must continue to develop agreements that remove the uncertainty arising from banks being unsure of their losses in return for improved lending conditions for families and businesses. Perhaps if you implemented the full Tory policy of the guaranteed loan scheme, instead of the piece meal gesture that you have done, that will go some way to dealing with this issue.
We need new institutions to support British start-ups, particularly those with innovative, high-growth potential. Nothing like a new institution as a new government.
We want to ensure that the new banking system that emerges over the coming years meets all these requirements - and becomes the servant of our economy and society, never its master. But Gordon you were the slave to the economy, constantly spending billions as the boom went on. Your tripartite system failed, and you did nothing to fill the country's coffers for a downturn. With you it has been inaction after inaction, not once did you try to reel in the bankers, until it was too late. Now you try and blame them for everything. But the fact is that there is only one man responsible. Look in the mirror and you'll see him.
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