20 July 2009

David Cameron and George Osborne today launched the Conservative Party’s Policy White Paper on Banking. The White Paper sets out the Conservative plan for sound banking that will lead the British economy from crisis to confidence and is an essential component of a sustained economic recovery. Launching the paper David Cameron said “last autumn, our financial system suffered its most destructive crash since the 1930s, taking an economy already in recession and plunging it further into the mire. The decisions that led to this crisis represent a policy failure of historic proportions."

The white paper sets out Conservative policy to:

• Abolish the Financial Services Authority and abolish the Tripartite regime it operated with the Bank of England and the Treasury.
• Create a strong and powerful Bank of England with the authority and powers necessary to ensure financial stability.
• Create a powerful Consumer Protection Agency that will bring together in one place the consumer powers currently and confusingly split between the old FSA and the Office of Fair Trading.
• Demand that banks set aside much more of their own money, or ‘capital’, for their risky lending as a form of insurance policy.
• Appoint a Treasury Minister with special responsibility for fighting our corner in Brussels so that European regulations are right for the City of London.
• We will also ask the Office of Fair Trading and the Competition Commission to conduct a focused examination of the effects of consolidation in the retail banking sector.

David Cameron added “Ten months on, the banking system remains broken, held together by billions of pounds worth of taxpayer loans and government guarantees. The public finances are awash with red ink, burdening every child born today with £22,500 worth of debt.

"Businesses are still going bust, houses are still getting repossessed and unemployment queues are still rising at an unprecedented rate.

The decisions that led to this crisis represent a policy failure of historic proportions.

We now need deep, wide-ranging reform that matches both the magnitude of the crisis and the scale of the hardship inflicted on the British public.

That reform must be based on a clear understanding of what went wrong in the first place – and a clear determination to put it right.

I believe three things led to this crisis.

• First, this Government’s imprudent attitude to debt as it failed to fix the roof when the sun was shining.
• Second, no one took responsibility while debt across the whole economy spiralled out of control.
• Third, irresponsible behaviour in some of our banks was allowed to go unchecked and the financial system become unstable.

And it will be the economic priority of a Conservative Government to address each of these in turn."

Click to download a copy of the Conservative White Paper on Sound Banking (2.50MB, )