24/12/2015 04:26 GMT | Updated 23/12/2016 05:12 GMT

Osborne's Present to Senior Bankers

It may have escaped many people's attention in the busy run up to Christmas, but in Parliament's final week Britain's senior bankers were delivered a special present by Conservative members in the House of Lords, at the behest of George Osborne.

As Lords debated the Bank of England and Financial Services Bill, Conservative Peers pushed through a change in the law which will reduce the onus on senior bankers to adhere to their responsibilities to their banks and to wider society - the abolition of the 'reverse burden of proof'.

One of the reasons so few senior bankers were subject to legal consequences in the aftermath of the banking crisis of 2008 was the defence of ignorance of what was going on in the very banks over which they presided. The reverse burden of proof is meant to change that.

It was introduced as part of a range of measures proposed by the Parliamentary Commission on Banking Standards in June 2013 and would mean that senior bankers would have to demonstrate that they did not know about bad practices in the institutions they run.

Its goal was to safeguard our banking system and society from the kind of culture which led to the banking crisis of 2008 - by amending behaviour to prevent senior bankers crashing their banks and still being hugely rewarded in the process.

The reverse burden of proof regime was due to be come into force in March 2016, but now through the Bank of England and Financial Services Bill, the Conservative Government intends to abolish it before it is even implemented and therefore without an evidence base upon which to judge its effectiveness in practice.

Strengthening regulation and making it more effective is not only common sense - it is common sense rooted in bitter experience. And it's necessary to try to prevent history repeating itself - at great financial cost and at great cost to our society. Poor and ineffective regulation helped to create the circumstances which led the financial system to crash in 2008.

It was public outrage that helped to deliver a political consensus on reform - both in the UK and across the world.

After the banks dragged Britain - and the world - into the financial crash of 2008, many realised that the banking system needed to clean up its act. Greed, delusion and a hands-off approach to the banking system from successive Governments both Conservative and New Labour were major factors contributing to the creation of the biggest recession since the 1930s. Our mighty financial institutions were humbled as markets crashed and money dried up.

So new regulations were created and new institutions set up with the aim of ensuring the bankers' folly could never be repeated. Tighter rules and new regulatory bodies were set up for the purpose of monitoring bankers and traders.

But it seems the Conservative Government takes a different view - that there is no need for this key plank of banking regulation in the new bill.

It would be dangerous to presume that everything is now just fine with our banking system. It is a huge risk to assume that it's safe to return to 'business as usual'. Politicians who believe that all we need to is to return to 'letting the bankers get on with it' may come to regret taking this view.

But with memories of the 2008 banking crisis fading in some quarters, it seems that the Conservative Government thinks it can start to undo that good and necessary work.

Moves to return to the very business as usual of the bad practice, greed and short-termism in the banking system which brought us to the brink in 2008 is in the interest of the top 1% and not wider society. Osborne's decision is about one thing and about one thing only: protecting top bankers.

What society needs is effective regulation of senior banking staff and a closer monitoring by our Government of behaviour in the banking system.

But George Osborne and the Conservative Government should know that Labour will continue to stand up for ordinary people and hold this Government to account on banking reform.

When the Bank of England and Financial Services Bill comes to the Commons in the New Year, that is exactly what I will do.