James Ashton: We need the option of letting a bank fail

It is just as well that Spain doesn't need a bailout. Even Mariano Rajoy, the Prime Minister, doesn't believe the eurozone could cope if its fourth-largest economy got into trouble.

As he sets about cutting back on public-sector spending this week, you have to wonder how high Europe's firewall needs to be to settle investors' nerves, and when the European Central Bank can take lenders off its life support system.

At the same time as the eurozone crisis drags along, will Britain's new defence systems be robust enough to insulate us from another crash?

The powers of the Bank of England's new Financial Policy Committee are still being haggled over in the aftermath of the second reading of the Financial Services Bill. The FPC, a new arm of the Bank of England being set up to police financial stability, is unlikely to win any popularity contests. But if it can introduce a few more circuit breakers into the system, then it should be welcomed. Without them last time, the woes of relatively small banks in the shape of Northern Rock and Lehman Brothers came close to pushing the global financial system over the edge.

As one third of the old tripartite regulatory system, the Bank was complicit in failing to spot the last bubble inflating. But if next time around the government of the day has a choice between bailing out a lender or letting them fail, that can be construed as progress. It is not having an option at all that cost the taxpayer so dear in 2008.