Critics savage Darling's shake-up

The Chancellor's reforms were attacked by opposition MPs as well as his own party's backbenchers yesterday, who accused Alistair Darling of missing his opportunity to clamp down on those who had led Britain into financial meltdown, while allowing a regulation system that had failed the country to persist.

George Osborne, the Shadow Chancellor, said the proposals were a "totally inadequate response" to the storm that derailed the economy, saying they did nothing to fix the "dysfunctional" regulation system and combat debt levels. "None of these difficult questions are properly addressed," Mr Osborne said. "It means we have more of a white flag than a White Paper, a complete surrender of this Government's responsibility to fix the system of regulating the City it created and which so spectacularly failed."

Vince Cable, the Liberal Democrat's Treasury spokesman, said the measures amounted to a "blank paper" that took little action to discipline the banks that have had to be bailed out with taxpayer's money. Though the Government's plans included powers to block excessive pay deals for bankers, they stopped short of imposing a pay cap. "The Government has failed to send a message to the banks that excessive risk-taking and bonuses are simply unacceptable," he said. "There will be champagne corks popping all over the City this afternoon – the Chancellor's statement proves that it really is business as usual."

Fears Mr Darling had failed to go far enough were raised by John McFall, the chairman of the Treasury select committee and an ally of Gordon Brown. He said a banking commission, made up of people from across society, needed to be included in reforms of the City to ensure the sector served the wider needs of the country rather than its own short-term gain. Other senior figures, including the former deputy prime minister, John Prescott, had also called for tougher action on bonuses.

There was already talk yesterday that the Government would have to act quickly to ensure its new measures even reached the statute book before the next election, which has to be held by the start of June.