Treasury ministers will be in talks with their US counterparts next week to consider replicating Barack Obama’s banking reforms after the President released details of sweeping changes across Wall Street.
President Obama shrugged off recent criticism which has seen his approval ratings plummet by 18 points to announce a series of measures designed to end the culture of excessive risk taking in the financial sector.
They include tough measures to cut the size of banks and some of the biggest institutions will be ordered to close down sectors of their business regardless of their profitability.
New regulations will also forbid banks to operate hedge funds or private equity funds and will stop "proprietary" trading where banks use their own corporate funds to gamble on the capital markets.
Many consider the proposed changes as the most significant structural changes to the banking sector since the Glass- Steagall of 1933 during the Depression which separated investment from commercial institutions.
Obama said: "The American people will not be served by a financial system that comprises just a few massive firms. That's not good for consumers; it's not good for the economy."
Lord Myners, the City Minister, will also discuss ways in which to enforce a levy from the financial sector as part of an already arranged G7 meeting as banking institutions across the world are again making huge profits after being subsidised by the taxpayer.
A Treasury spokesperson told the guardian.co.uk :"We will consider the proposals very carefully. Countries around the world are rightly taking measures to increase stability and reduce risk in the financial system."
The Conservative Party and Liberal Democrats Seize on Obama Reforms
Shadow Chancellor George Osborne welcomed the news from across the Atlantic confirming that the Conservatives would back Obama’s proposals as part of an international effort.
He also alluded to his party’s advocacy of cutting bank sizes and attacked Gordon Brown who has been previously lukewarm on the issue.
Speaking on Radio 4’s the Today programme Osborne said: "The argument that is always deployed against me when I've made these proposals in recent months, often by the banking community themselves and indeed by Gordon Brown, who is wholly opposed to this, has been: 'Ah well, you'll never get America to agree.'
While Liberal Democrats Treasury Spokesman Vince Cable told his party website:“We must break up British banks to ensure that taxpayers are not forced to underwrite unnecessary risks.”
Cable believes that breaking up the banks will make the sector more competitive and not result in major financial houses falling leading to taxpayers having to underwrite toxic debts and provide bank capital.
Although any progress on this would have to be in tandem internationally he exclaimed: “What is clear is that we would not be acting alone – we are already lagging behind the US.”
Office of National Statistics Say Borrowing is Increasing From Last Year
Meanwhile there was more bad news for the economy as the latest figures from the ONS revealed that net public borrowing for last month was £15.7 billion compared to £13.8 billion in December 2008.
Borrowing as a proportion of GDP has now tipped over the 60% mark and was pegged at 61.7% at the end of December 2009 with net debt standing at £870 billion from £733.9 billion at the end of 2008.
However the respected Institute for Fiscal Studies (IFS) have said that borrowing figures are likely to be less than the £178 billion forecast for the 2009/10 financial year in the pre-Budget Report.
In December 2009 government tax receipts fell by 0.4% and government spending was 7.5% higher than for the same period last year but this was still less than what was forecasted in the pre- Budget statement.
Public Spending was also not as high as expected as Chancellor Alistair Darling forecast that for 2009/10 outlay would be at an increase of 7.4 % compared to the financial year 2008/09 but the latest IFS figures have scaled that down to 5.8% for the year to date.
Sources: the Guardian, Office of National Statistics, The Institute for Fiscal Studies, Liberal Democrats Party website.
Peter Taberner - My writing career has spanned over the last five years and during that time I have been involved in investigative reporting from Bosnia, ...
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