by Paul Donovan
John McFall, the chair of the Treasury Select Committee, believes that, in future, financial institutions must be allowed to go bust – because taxpayers will not be prepared to fund another bail out.
Mr McFall, who recently chaired a Treasury Select Committee session when Royal Bank of Scotland chief executive Stephen Hester defended his £9.7 million pay package, decried the position today where “profits are privatised while losses are socialised”.
He does not believe the public is aware of the true depth of the banking crisis. “It was resuscitated, people don’t realise how the system almost died,” said Mr McFall, who pointed out that the crisis resulted in the Government putting £117 billion net into the banking sector with another £131 billion in shares taken.
“It is the job of politicians to ensure that we get a banking system that serves people in society. So far, the public have been missing from this debate”, said Mr McFall, the Labour MP for West Dunbartonshire and a keen supporter of the idea of a post office bank.
“I’ve been advocating such a network through the Post Office network. It would be a means to bring about financial inclusion, as there are many people outside of the banking system. In today’s society, financial exclusion means social exclusion.
“We need to look at some of the things that worked in the past. More mutualisation would be another path. It was the building societies that demutualised and became banks, like Northern Rock and Bradford and Bingley, that went bust.” One initiative which he hopes may help plot the way forward is the Future of Banking Commission, chaired by Conservative MP David Davis.
City minister Lord Myners said this week that the “too big to fail” problem has to be eliminated. Writing in The Guardian, he said that Britain was leading international efforts to make banks set up “living wills”.
He added: “Any institution that thinks it will always be bailed out when the going gets tough is an inherently dangerous institution.
