Lib Dems pledge to regulate City

Mr Clegg urged a new relationship between government and the City

Liberal Democrat leader Nick Clegg has pledged to tackle "bad practice" in the City of London as he outlined plans for a better system of regulation.

He said he wanted his to be the "party that the City can trust" but said "more intelligent" regulation was needed to prevent "boom and bust excesses".

His planned reforms include some to rein in the bonus culture and pay.

He also backs bringing house prices within the official inflation index and making bank charge more transparent.

Outlining his New Deal for the finance industry, Mr Clegg said excessive pay and bonuses could lead to a "culture of greed and gambling".

'Binge lending'

He said the increasing wealth of the City of London had produced "few visible positive spillovers" for neighbouring areas and little benefit to "provincial Britain".

He said: "The credit crunch has exposed a major contradiction within UK banking - an industry which simultaneously presents itself as fiercely competitive and entrepreneurial but then runs to the government to be bailed out in times of difficulty."

He said the Thatcher government's "big bang" reforms had created innovation, but had also led to a boom-bust cycle of "binge lending", followed by negative equity and repossessions.

Mr Clegg said the City of London was "one of the most dynamic and creative parts of the British economy" but was "by no means perfect".

"For too long, the government has refused to stand up to or consult with the City when there are problems," he said.

"I want the Liberal Democrats to be the party that the City can trust, but also the party that will take on injustices and bad practice, for the benefit of the country and the economy as a whole."