The “dog’s breakfast” that is City regulation

Mervyn King spends "more time..... talking about tennis" than about finance.

Labour peers have rounded on the government this week over its Financial Services Bill, which will overhaul the way the City is regulated.

Opposition spokesman Lord Eatwell attacked the Bill as a “dog’s breakfast” which failed the  four tests of “accountability, clarity, efficiency and transparency."

The Bill was receiving its second reading in the House of Lords yesterday. Lord Eatwell said that “instead of drafting a new template for the financial services industry” the government had constructed a “dog’s breakfast of amendments to earlier legislation”.

He promised to press for improvements to be made to the Bill, which he said was "flawed."

Former City minister Lord Myners joined the criticism, claiming Bank chief Mervyn King spent more time in board meetings talking about tennis “than about issues of financial stability”.

However, Lord Sassoon, Treasury minister, defended the Bill, saying that the current system had failed because “no one had the single responsibility to monitor the financial system”. The new legislation would put power firmly with the Bank of England, he said.

The Bill, which has completed its Commons stages, was carried over from the previous parliamentary session. It tears up the tripartite system of regulation where powers is shared between the Treasury, the Bank and the Financial Standards Authority.

Instead, a new Financial Policy Committee (FPC) within the Bank of England, will be tasked with monitoring systemic risks, while the Bill also creates a Prudential Regulation Authority (PRA) as a subsidiary of the Bank of England, and a Financial Conduct Authority (FCA) covering consumer protection.

Yesterday, it was announced that the outgoing chairman of KPMG, John Griffith-Jones, has been appointed as the first non-executive chair designate of the FCA.

Helen Roxburgh is the online editor of Economia

Mervyn King, Photograph: Getty Images

Helen Roxburgh is the online editor of Economia

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Hilary Benn has been sacked. What happens now?

Jeremy Corbyn has sacked Hilary Benn, effectively challenging his critics to put up or shut up.

Hilary Benn been sacked from the shadow cabinet, following an article in the Observer reporting that the former shadow foreign secretary had told Labour MPs he would challenge Jeremy Corbyn should Corbyn lose the vote of confidence in his leadership that the PLP are due to discuss on Monday.

Anti-Corbyn plotters are convinced that they have the numbers to pass the no confidence motion in Corbyn’s leadership. Passing that motion, however, would not formally trigger either Corbyn’s resignation or a leadership challenge.

The word from Corbyn’s inner circle is that he would remain in post even if he were to lose the confidence vote, and dare his opponents to collect the 50 names they would need to trigger a leadership challenge.

Should that come about, Corbyn’s allies are certain that they would triumph over whoever ran against him. As one senior source said “they lost really badly in September and that’s not gonna change”.

Labour’s rebels are convinced that they have the numbers necessary to trigger a formal challenge to Corbyn’s leadership.

What happens next is fraught as the relevant clause in Labour’s rulebook is unhelpfully vague: 

“ii. Where there is no vacancy, nominations may be sought by potential challengers each year prior to the annual session of party conference. In this case any nomination must be supported by 20 per cent of the PLP. Nominations not attaining this threshold shall be null and void.”

The question that no-one is certain of the answer to: whether the challenged leader would have to seek nominations as well or if they would be on the ballot as by right. My understanding is that the legal advice that Corbyn’s critics have is that Corbyn would not automatically have a place on the ballot. But Jolyon Maugham, a lawyer who writes regularly for the New Statesman, looked over the clause for us and believes that he would.

More important than the legal basis, though, is what the party’s ruling National Executive Committee, which would rule on whether Corbyn had to seek nominations to stand, believes.

Although Corbyn has received the backing of 12 of Labour’s affiliated general secretaries, a well-placed source tells me that they are confident the NEC would rule that Corbyn will need to seek nominations if he is to stand again.

But control over the NEC is finely balanced, and could shift decisively towards Corbyn following this year’s elections to the NEC; one reason why Corbyn’s opponents are keen to strike now.

In that situation, Corbyn’s allies believe they can secure the 50 nominations he would need – the threshold has been raised due to a rule change giving Labour members of the European Parliament the same nominating powers as their cousins in Westminster – thanks to a combination of ideological support for Corbyn and pressure from the party’s grassroots. Senior sources believe that once Corbyn reached shouting distance of 50 nominations, the bulk of the shadow cabinet would quickly fall in line. Another estimates that the “vast majority” of the PLP accept Corbyn requires more time and that the plotting is the result of “a rump” of MPs.

But Corbyn’s critics believe that the European result, which saw Labour voters reject the party line in large numbers, has left Labour MPs with large majorities in the party’s ex-industrial seats more spooked by their voters than by their activists, putting them in the same group as those MPs with small majorities. (The two groups who currently pose the biggest danger to Corbyn are MPs who are old enough to be eligible to collect their pension at or before the next election, and MPs with majorities of under 2,000.) 

Who's right? Much depends on the disposition of Labour's 20 MEPs. Prior to Britain's Brexit vote, they were believed to be the most sensitive to the concerns of the party's activists, as Labour members vote on the order of the party's list, making anti-Corbynites vulnerable. Now all 20 MEPs are out of a job at, or before, the next European election regardless, the question is whether they decide to keep Corbyn off the ballot, or try to curry favour with Corbyn's supporters in the membership prior to making a bid for seats at Westminster. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.