There was one thing missing from George Osborne’s cosy Sunday morning chat with Andrew Marr on the BBC, and his subsequent View from Europe interview with George Parker, the FT’s political editor: evidence that this man quite has what it takes to be Britain’s next Chancellor of the Exchequer.
In fact, quite the opposite. Osborne’s headline-grabbing promise to scrap the FSA betrayed a breathtaking naivety. Does he really think we can just dismantle the infrastructure of Britain’s financial regulator — 10 years in the building — and then simply reconstruct it in some supposedly firm old hands in Threadneedle Street, and, hey presto, everything will be fixed?
This was clap-trap policy formation at its most dangerous.
The Tories had a bad start to the financial crisis, allowing Vince Cable to win all the populist votes for the Liberal Democrats. Osborne is now getting a belated thrill from making Gordon Brown and the existing chancellor, Alistair Darling, look flat-footed and devoid of creative ideas when it comes regulatory reform.
But what’s so smart about that? And at what price?
We assume that morale at the FSA is already rock bottom. The hiring of talented staff capable of sweeping up after the most severe financial crisis in living memory must be difficult enough without the Tories painting the body as a lame-duck institution that is about to be wound up.
But what of the Osborne plan? This superficial idea that the Bank of England would somehow have handled things better — and will do so in future, given the chance — just isn’t supported by any evidence, historical or present.
It was the shocking failure of devolved old-boy regulation under the Bank, the Securities & Investments Board, and the various sub-regulators like the Securities & Futures Association, that required the establishment of a powerful central regulator like the FSA in the first place. In truth, oversight of the City has been in more or less constant crisis since the Thatcher government reforms in the mid-1980s.
The last thing that is needed now is yet another extended period of structural upheaval, where bureaucrats spend their time taking lumps out of each other rather than tackling the underlying problems.
Those include the principal policy mistake (made in the 80s) that wholesale markets are somehow divorced from the underlying economy, and therefore require a separate lite-touch policing regime. There’s also the matter of reforming unworkable legislation, which still seems to be arriving from Europe by the truckload.
Effective financial regulation is about fostering good communications between multiple agencies — here and abroad. It’s also about nitty-gritty technical matters and making sure that the law, as framed, works. It’s about detail.
The Tories’ are due to publish their 52-page ‘Plan for sound banking’ later on Monday. It promises to be a shallow read.
Related Link:
Tories would scrap FSA if elected – FT
Tories to outline banking reform – BBC story
George Osborne – FT video interview
Transcript: FT interview with George Osborne