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The Coalition needs to decide its policy on banks. Quickly.

Tim Montgomerie

Nick Clegg was the top guest on the Andrew Marr show yesterday. Few politicians talk with their hands quite so much. The Deputy PM is also the most emphatic of politicians. Things are wholly wrong, totally right, or very unjustified.

Clegg16handsOn yesterday's Andrew Marr programme the Deputy Prime Minister Nick Clegg expressed support for a thorough restructuring of Britain's banks. Mr Clegg said there was a "very strong case" for separating "casino" banking from safer high street retail banking. The aim, he said, was to make banks safe and to ensure that taxpayers didn't have to rescue banks that were "too big to fail".

Mr Clegg's idea is backed by certain Tory MPs, including David Davis, but others - Douglas Carswell - are sceptical and have recommended more evolutionary solutions to the problem of big banks.

Sajid Javid, Tory MP for Bromsgrove, has argued in the Commons for a debate on the separation of banks into their retail and trading activities.  Most important, he insists, is that the British government takes a decision soon.

"Until Britain decides what kind of bank structure it wants there's a risk that financial institutions will hesitate about expanding in London. More than the 50p tax band and the anti-City rhetoric of many politicians, this planning blight is unsettling investors.  America has decided its regulatory structure and although it's not ideal for many banks they do, at least, have certainty in planning for the future."

Negotiations between the Coalition and the banks over increased lending to British business are taking longer to conclude than hoped. The Treasury is prepared to allow banks to pay big bonuses if the banks agree to increase financing of small and medium sized enterprises. Banks complain, however, that the government is being unrealistic and will force them to lend unwisely.

Balls ED QT The Independent, meanwhile, notes Coalition efforts to remind voters of Ed Balls' record on bank regulation:

  • Michael Fallon, the Tories' deputy chairman, said: "Ed Miliband and Douglas Alexander can complain all they like about Labour's terrible record on banks, but Ed Balls, the man responsible for 13 years of regulatory failure, is now back in charge of their economic policy."
  • Nick Clegg, the Liberal Democrat leader, said: "If you ask yourself who was in charge of the City when they were gorging themselves on bonuses and lending irresponsibly; who allowed the housing market to let rip, to become a casino, pitching thousands and thousands of British families into debt; who was whispering into Gordon Brown's ear Budget after Budget, creating this huge fiscal deficit – the answer to all of those questions is Ed Balls."

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