Sunday, 19 July 2009

UK opposition wants to shut down FSA and will cut public services

The following are some indications found in the UK media on Sunday from the man who might well become the next Chancellor of the Exchequer.

A Conservative government would abolish the Financial Services Authority and hand regulation back to the Bank of England, George Osborne has confirmed.

The shadow chancellor told BBC One's Andrew Marr show the system of banking regulation set up by Gordon Brown had "patently failed".

According to The Sunday Times, Mr Osborne may float the idea of separate markets regulator, along the lines of the US Securities and Exchange Commission, in addition to the Bank of England's supervisory role.

Mr Osborne has said he believes some banks were allowed to become too big - and he could set out plans to allow the Bank of England to break up banks whose size threatens the stability of the wider economy, the newspaper adds.

On public spending, he told Andrew Marr there had to be a culture change across government - starting with the cabinet - to take account of the fact the "cupboard is bare".

He added: "I have not ruled out tax rises... but I do think after a decade of over-spending, people should not be over-taxed because of that mistake.

"The bulk of the strain in dealing with this debt crisis has to be cutting public spending, restraining public expenditure growth."

Exactly how Mr. Osborne would break up banks that are too big to fail and how this would be affected by supra-national banks that operate in the UK is left for later.
What does seem clear is that the Conservatives are now prepared to admit that their focus will be on public spending cuts.

Meanwhile Mr. Brown will do his utmost with weasel words to pretend that Labour policy would not result in spending cuts. Let's see if S&P are keeping an eye on this from the point of view of revising their outlook on the rating of the public finances.

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