UK Conservative party outlines financial and economic reforms in new policy document

George Osborne, shadow chancellor, UK Conservative Party

The UK's shadow chancellor, George Osborne, reaffirmed the Conservative party's commitment to "abolish the failed tripartite system of regulation and put the Bank of England back in charge" of prudential supervision at the launch of A New Economic Model: Eight Benchmarks for Britain in London today.

With an election just four or five months away in the UK, political focus on the fragile economy and the banking sector is increasing. The policy document said that the Conservative party's restructuring of the UK's financial services regulatory regime "will restore the Bank's historic role in monitoring the overall growth of credit and debt in the economy". The Conservatives would also broaden the Bank of England's remit to include financial stability, hold an emergency budget within 50 days of taking office, and set up an Office of Budget Responsibility to help preserve the UK's AAA credit rating.

Also in the policy document is a promise to "pursue international agreement to put in place an insurance fee on banks and to prevent retail banks from engaging in large-scale proprietary trading that puts the stability of the bank at risk". While stopping short out an outright call for a ban on proprietary trading that US President Barack Obama is calling for, the proposal would impose a separation of banking businesses for the first time in modern UK banking.

The shadow chancellor's policy document is also promising a competition review of the banking sector "that will inform our strategy for selling the government stakes in state-controlled banks", possibly indicating that some of the banks the government currently has a stake in could be broken up as a condition of the removal of government support.

He also called for lower leverage in the banking system as a whole, and less dependence on "unstable wholesale funding". Said Osborne at the launch event: "The financial services sector is one of our global success stories, and we want it to stay that way. But because of a massive failure of regulation it has put our whole economy at risk."

Other proposals in the policy document included improving tax competitiveness and reducing overall business regulation.