A grown-up debate
Whisper it softly, but there was the beginning of a grown-up debate about financial sector reform and public spending in Wednesday's two big speeches at the Mansion House.
When it comes to better regulating the banks, Robert Peston has flagged up the key points of difference between the chancellor's speech and governor of the Bank of England's, including the governor's pointed call for the Bank to have more powers to match its new responsibilities.
Mervyn King quoted an American economist saying: "[i]f some banks are thought to be too big to fail... then they are too big." Whereas the chancellor said in his speech that "the solution is not as simple, as some have suggested, as restricting the size of the banks."
It sounds like a pretty straightforward disagreement. And these two sophisticated men will not be surprised to see it written up that way. But as Robert notes, on this point the difference is one of tone more than of content.
The truth is that both are right. That is what makes this stuff so hard.
In effect, Mervyn King said in his speech that it was not sustainable to allow banks to grow big doing reckless things, all in the knowledge that if things get too tough, the government will bail them out. "Something must give."
He's right. But the chancellor is also right that there aren't any easy solutions.
If banks stay small, you might avoid the too-big-to-fail problem - most of the time. But you might also raise the chance of individual bank failures, by making each bank less capable of absorbing shocks for themselves. And if the past few years teaches anything, it is that if every bank has made the same mistake, they are all going to get bailed out by the government, regardless of how big they are, and regardless of the stern warnings politicians might have given out in the past. Governments don't let entire banking systems go to the wall.
Both the chancellor and the governor know this. They also know that how well different countries' banking systems have fared during this crisis seems to have had very little to do with the structure of banking regulation in place before the crunch.
Australia, Canada and Singapore have all come out of this rather well. Each came into it with entirely different regulatory set-ups, with the central bank playing a greater or lesser role than here in the UK.
There is much more to be said on this topic. Suffice to say here that this is a difficult and profoundly important debate which isn't going to be over any time soon. Given the recent history, I'd say it's no bad thing that it's being held in the open.
It's probably too much to hope for a grown-up exchange of views on public spending as well. Certainly we didn't get it in Prime Minister's Questions on Wednesday, as the prime minister once again banged the drum on Tory cuts - even at the cost of mis-describing the government's own plans for public investment in the years ahead.
He suggested that such investment would continue to rise until the London Olympics in 2012. Yet the Budget Red Book clearly shows capital spending starting to fall from next year. Downing Street later "clarified" the prime minister's remarks, suggesting that he was also including expenditure on the Olympics itself, and the proceeds of future asset sales, which have yet to be specified. Hmmm.
Darling had a pro forma attack on the opposition in his speech. He said that "to attempt to balance the books now, simply by cutting public spending across the board... would be sheer madness". To my knowledge, that's not exactly what her Majesty's Opposition has proposed, but you get the idea.
The most striking thing about the chancellor's speech was his refusal to enter into a debate - with his own party or with the Conservatives - over what would be cut or what would be saved.
"Given the uncertainties ahead," Darling said, "it would be a mistake to try now to set in stone detailed spending plans for individual departments five years ahead." As Nick Robinson was quick to point out, that's a message for Ed Balls as much as for George Osborne. For now, at least, the chancellor does not appear to want to enter the fray.
Mervyn King had his own comment on the budget in his speech, to the effect that the government needed to show clearly how public borrowing will come down in future. Famously, he has said that before, in his testimony to the Treasury Select Committee. But since then, we have had a Budget in which Alistair Darling probably thinks he provided just such a plan. Apparently the governor disagrees. But who knows, maybe one of these days they can have a grown-up debate about that as well.