Leading article: The former Chancellor's critique still applies

Arrogance and stupidity are not confined to a particular tricky moment in the banking sector

The occupants of the village that is Westminster will no doubt be preoccupied by the political sensation that is about to be uncovered in the memoirs of the former Chancellor of the Exchequer, Alistair Darling. There is all the delicious detail of a volcanic Prime Minister, Gordon Brown, setting up a parallel Treasury run on the side by the then Education Secretary, Ed Balls, and Shriti, now Baroness, Vadera who – according to Mr Darling – was "only happy if there was blood on the floor – preferably that of her colleagues". It is all grist to the political mill.

But what will resonate most with the public are the comments by Mr Darling on the City bankers with whom he dwelt as the world was seized by a global financial spasm with banking institutions collapsing, a massive credit squeeze and national economies plunged into a recession from which they have not yet properly emerged. "My worry," Mr Darling writes, "is that they [the bankers] were so arrogant and stupid they might bring us all down".

Quite. It is a worry which has far from abated among a general population plagued by spending cuts, job losses, vanishing pensions and general belt-tightening. Arrogance and stupidity are not confined to a particular tricky moment in that sector, as Barclays and HSBC have demonstrated with their more recent threats to relocate outside the UK if banking reform is too stringent. And the bankers are clearly still at work behind the scenes on the current Chancellor George Osborne, trotting out the old combination of dangling carrots and waving sticks.

The banker-friendly Tory Chancellor is currently engaged in a struggle over the pace and scale of reform with his Liberal Democrat Coalition partners. The Vickers report on the UK banking sector is to be published next week, and expected to recommend, among other things, that banks split their retail and investment arms – so that high-street accounts are placed behind a firewall, safe from the attentions of those involved in riskier "casino" activities. But the latest signal from Westminster is that Mr Osborne has decided that a major shake-up of Britain's banks may be postponed until after the 2015 general election.

It is clear which siren voices the Conservatives have heeded. Now is not the time to clean up banking, the bankers say, for that could imperil the fragile economic recovery. Regulatory changes to compel high-street banks to increase their reserves could force them to curb lending to small and medium-sized businesses at a time when the economy is slowing. The emphasis should be on recovery rather than punishing the banks. This is disingenuous stuff. The banks must not be regulated when the economy is booming, they say, and they cannot be reformed when things are going so ill. It is not hard to see what Alistair Darling means about arrogance and a lack of gratitude for the taxpayer bailout.

The complexities of ring-fencing the accounts of ordinary people may need some time. But five years? This is special pleading from the banks and David Cameron should take a much more robust attitude. Uncertainty and instability in the markets make it more, rather than less, urgent to put the bankers' house in order.