George Osborne does not know very much about the global financial system.
He took an upper second in History before failing to become a journalist. The only non political jobs he has ever held are as a data entry clerk for the NHS and at a well known London department store. After failing in his ambition to become a journalist, he began to work for Conservative Central Office. With a short stint working as a special advisor to Douglas Hogg at the Ministry of Agriculture and then in the boiler room at 10 Downing street, he stayed with the Conservative central organisation until his election as an MP in 2001 at the age of 30.
It is a fairly thin CV and not one that would get him much credibility if he were seeking work in a major firm in the City of London. However, with the arrogance that only the truly ignorant possess, he now presumes to inflict a whole new regulatory structure upon the London Financial system, by the abolition of the Financial Services Authority and the transfer of its powers to the Bank of England.
There is a case for critical regulatory change, but the disruption that Mr. Osborne proposes will be dramatic and long lasting. Almost immediately Hector Sants, the head of the FSA, has had to cope with a rapid exodus of key staff, and this is degrading the institution even before the Conservatives can even enter office. The problem is that Mr. Osborne, having had no executive experience, does not understand just how difficult it will be to implement the changes he suggests. The knock on effects of the changes will take several years to cope with, just as the creation of the FSA was itself disruptive. In fact it is the constant changes in the regulatory regime for the financial sector that have been a significant factor in the failures of the system over the past two years.
What is required is not yet another wholesale change in the system, but stability within the regulatory regime itself. Mr. Osborne, by seeking -as politicians will- to be "radical", is in fact condemning the financial regulatory regime to several years of drift and dislocation at a time when the financial crisis is very far from over.
It takes a very special kind of arrogance for a layman with no special understanding of the subject to insist on such a far reaching policy. Mr. Osborne is causing damage before he even enters the front door of number 11 Downing Street- it does not bode well for the rest of Conservative policy on the economy if one of its very few definitely declared policies is so badly thought out.
(Full disclosure: Hector Sants was my boss at UBS and is a man I greatly respect)