Balls: 'Govt Cuts Go Too Far, Too Fast'

The Government's spending cuts are "happening too quickly and go too far", the shadow chancellor is saying.

Ed Balls will continue his criticism of George Osborne after the Chancellor confirmed major banking reforms.

Mr Balls is making his comments during his speech at the London School of Economics.

It comes after Mr Osborne said the process of selling off the Government's massive stake in banks was starting - with a buyer being sought for Northern Rock by the end of the year.

In his annual Mansion House speech, the Chancellor also confirmed his backing for plans aimed at preventing another financial crisis.

He will force banks to ring-fence their retail operations from their investment arms, his first public support for proposals to shield High Street lenders from the risks of "casino" banking.

The details were exclusively revealed by Sky's Mark Kleinman on Tuesday.

"Taxpayers today own a large part of the banking system, and underwrite guarantees to parts of the rest," Mr Osborne told the prestigious event in London.

"It's time we started to plan our exit."

The "ring-fencing" proposals have been made by the Independent Commission on Banking.

The precise design of the "firewalls" between the retail and investment branches of banks such as Barclays, HSBC and RBS will not be known until the Vickers Commission publishes its final report on September 12.

Mr Osborne said the "new settlement" for financial services will allow the City of London to maintain its position as a global leader "without putting at risk the entire economy".

"As a global financial centre that generates hundreds of thousands of jobs, a successful banking and financial services industry is clearly in our national economic interests," the Chancellor said.

"But we cannot afford to let it pose a risk to the stability and prosperity of the nation's entire economy.

"We should be clear that we want Britain to be the home of some of the world's leading banks, but those banks cannot be underwritten by the British taxpayer."

Mr Osborne added: "The Independent Commission on Banking has put forward two particularly important proposals.

"Bail-in instead of bail-out - so that private investors, not taxpayers, bear the losses if things go wrong.

"And a ring-fence around better capitalised high street banks to make them safer, and to protect their vital services to the economy if things go wrong.

"Today I have told the Commission that the Government endorses both these proposals in principle."

Speaking on Jeff Randall Live, the leading economist Prof John Kay called for bank bosses to be made personally responsible for the proper implementation of the new rules.

"There's another idea we should think about which is to impose liabilities on the directors of these banks, such that if the ring-fence doesn't work it's not just the bank but it's actually them themselves that will be at risk."

Mr Osborne also said that UK plc has faced a series of "headwinds" domestically and internationally over the past year.

But pointing to the latest encouraging unemployment figures, he insisted the economy is "on the mend".

Bank of England governor Sir Mervyn King said the UK's economy must still navigate stormy waters but was on the right course to return to stability following the financial crisis.

The world economy enjoyed "seven years of plenty" in the run-up to the banking crisis in 2007 but is now in the middle of "seven lean years", he said in his Mansion House speech.