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Monday, December 19, 2011

Clegg plays the high profile game

Putting aside his blip over the Eurozone veto, Liberal Democrat leader, Nick Clegg has had a good week in terms of profile and differentiating himself in policy terms from David Cameron.

Putting aside the spat over tax relief for married couples, which frankly is an obsession on the part of my party I have difficulty relating to, the most significant Liberal Democrat victory within government is clearly the acceptance of the Vickers report on breaking up the big banks and the promise that it will be implemented in full.

This act is the clearest sign yet that the Government has learnt the lessons of Labour's disastrous deregulation of the banks and their determination to avoid the sort of crashes that directly fed the economic downturn.

The plan is to initiate a wide-ranging overhaul of the structure of Britain's major banks, forcing them to split their high street and investment operations. The banks will have to put their operations into a legally distinct separate arm. We are told that exactly what goes into each entity will form the basis of detailed negotiations between ministers, the banks and regulators.

The Chancellor of the Exchequer will also tell the banks that they will have to hold more capital to act as a buffer against future financial emergencies. The intention is that the complex legislation underpinning the changes would be passed by 2014-15 and the full separation completed by 2019.

It is a significant decision and together with the £2.5 billion a year tax on bank profits shows that this Government are not going to let the banks shirk their responsibility for the 2008 crash.
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