Critics claim it is playing politics to press on with banking reform in the face of a stalling economic recovery. But it is no less of a political game to delay. And it would also be a vital opportunity missed.
Although cynics warned of a whitewash when a former central banker, Sir John Vickers, was tasked with crafting reforms for Britain's dysfunctional banking sector, the draft recommendations produced in April were anything but.
After a financial crisis that saw the British taxpayer stump up £850bn-plus to shore up banks deemed "too big to fail", this newspaper instinctively supports splitting banks' "casino" investment operations from the retail savings that were used to fund their excesses. The ring-fencing scheme proposed by Sir John – under which institutions set up internal "firewalls" so investment divisions can safely fail – is the most practical option.
But ahead of the Independent Commission on Banking's final report next month, the pressure to reconsider is rising. And there are signs that the Chancellor is buckling, and may push the deadline out to 2019.
The banking lobby has some powerful ammunition. It is true that the economy is in worse shape than when the draft reforms were published last autumn. It is also true that banks face escalating risks from the eurozone, as fears of a sovereign debt default depress share prices and raise hints of a second credit crunch. Now John Cridland has upped the ante even further. The director general of the Confederation of British Industry not only brands ring-fencing as "barking mad" in the current economic climate, but adds dark hints of "political reasons" for the Government to be seen to act, regardless of the cost to UK plc.
Such arguments must be resisted. The issue of share prices is the most obvious red herring. Markets price in new rules when they are set out, not when they come into effect. Given that Mr Osborne has already endorsed the ring-fencing as a concept, there is therefore no benefit in delaying its implementation.
The wider economic case is, superficially at least, more compelling. To breathe life into Britain's moribund recovery, businesses must be both confident enough to expand and able to afford to borrow the money to do so. There is evidence of problems with both. But it is myopic to suggest that reform, because costly, must therefore be avoided. Vast, universal banking operations are not the only route to economic dynamism, and the Government is rightly investigating alternatives, including, most interestingly, increased competition in the banking sector itself.
It was to be expected that vested interests would fight hard to maintain the status quo. Vince Cable – the Liberal Democrat Business Secretary – is toughening up his position, promising a lively intra-Coalition wrangle if the Chancellor wavers. He is right to do so. Britain's world-leading financial sector is indeed a vital part of the economy. But the banks cannot hold the Government to ransom, either by threatening to leave or by invoking the spectre of economic damage. They also cannot be maintained, free of moral hazard, at taxpayers' expense. Britain's banking sector is structurally flawed. It needs reform without delay.