George Osborne's repose to the Vickers proposal to create a "firewall" between the retail and "casino" activities of the banks is perhaps more robust than many feared. However, several questions remain.
Most obvious is: why on earth do we have to wait until 2019?. It is already four years since the run on Northern Rock. Four years after the Great Crash of 1929 the Americans actually introduced their Glass-Seagall Act which created a similar separation, not proposals to think about it. It is the repeal of the Glass-Seagall Act in 1999, with similar deregulation in the UK, which is largely responsible for our present financial woes.
Why therefore is there to be a seven year pause: time for the banks to find ways round the new regulations? VAT has been increased, benefits are being cut and public services slashed now, not in seven years time for us to get used to the idea. Just to put things into perspective, the recent riots are said to have cost the UK taxpayer £133m. Such rioters as have been caught and convicted have been punished now rather than been given seven years to sort themselves out. The cost of bailing out the banks is said to be in excess of £850bn but the bankers do get their seven years potentially to wriggle out of the consequences of their folly. So much for justice and all being in this together.
A second question is to ask whether a "firewall" or "ring-fence" is enough. There's already a whole financial industry devoted to finding ways round new rules, and this area will provide another lucrative field. Vince Cable has advocated complete separation between retail and merchant banking activities, and he is probably right.
Much is made of the estimate that the cost of the proposals, if fully implemented, is said to be between £4bn and £7bn. £7bn is roughly the total paid out in City bonuses in 2010.