This week the world has its’ eyes fixed firmly on a series of 90 minute events, unfolding on a grass pitch somewhere out in South Africa. Yes, indeed like a leap year the World Cup occurs only once every four years, and for many of us it is the single, most important tournament in the galaxy. Next week while the country sits at home imploring Fabio and his boys to go out and dismantle Slovenia, the government will be struggling hip-deep in political fallout as George ‘the boy’ Osborne takes to the stand and unveils the Lib-Con coalitions first budget to parliament.
While the rest of the world concentrates on the football, financial investment firms, bankers, politicians and media hacks will be focusing on one thing, and one thing only, namely Westminster. Anything the chancellor or a senior Downing Street official says regarding the financial sector will be closely monitored and scrutinised during the run-up to the budget.
Over the last month the coalition government has been on a media offensive, hoping to engender support amongst the electorate for the ‘savage’ series of cuts due to be announced during this parliament. One of the coalition promises was to enact a major restructuring of the financial sector, including the possibility of a separation between high street branches, business banking and the more risky venture capitalists.
A recent report commissioned by the consumer group Which and chaired by the former shadow Home Secretary, David Davis, argued in favour of a break up between investment and retail banks. Although the chancellor has been somewhat reluctant on this issue, it now looks like the notion of splitting up the banks may well become a reality. The main argument for going ahead with this is to protect current account holders and the safer, more traditional aspects of banking, from the riskier investment sectors of the financial industry which are prone to gamble upon stocks and derivatives.
As part of the new reforms George Osborne today announced that Bank of England would repatriate powers from the FSA and would be given more authority to help regulate the financial sector. Mr Osborne is keen to ensure that the country will not endure another unsustainable housing market boom. Another key part of the reforms will be a new bank levy which intends to reimburse taxpayers for the huge costs outlaid during the financial crisis. Undoubtedly the closer we get to the budget the more we will hear from Downing Street, more to follow…
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