Labour would get rid of junior City watchdogs

Labour yesterday hardened up its commitment to legislate to reform City regulation, with a promise that all the City's junior watchdogs would lose their identities and be converted into departments of the Securities and Investments Board.

Labour has long planned to legislate for a single regulatory authority but until recently left open the question of whether the individual regulators would maintain some form of separate identity within the planned single statutory organisation.

Mike O'Brien, the Labour City spokesman, made clear that this was unlikely. He said: "We do not believe there is any benefit in distinguishing SIB and the self-regulating organisations. It is an extra layer of bureaucracy. The SROs would be folded into the SIB."

The junior regulators include the Personal Investment Authority, the Securities and Futures Authority and Imro, the investment management regulator.

Mr O'Brien said: "At the moment, there is confusion, duplication and bureaucracy. Labour would simplify the structure and cut the cost of regulation by removing a layer of bureaucracy. We want to delayer the structure and change its nature."

It had developed into a hybrid structure, halfway between self regulation and statutory regulation, and had failed because it was too difficult to serve the public and business interests at the same time, Mr O'Brien said. Labour plans to make the SIB a statutory organisation answerable to the Treasury but operating from it at arm's length as a free-standing agency.

Mr O'Brien said this would simplify the structure, end "regulatory arbitrage" - in which firms seek to be regulated by the SRO giving them the easiest terms - and clarify responsibility. The public would know who to complain to and investors from abroad would know which rules would apply to their particular area of investment, he said.