Skip to main content

Osborne's Arrogance

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)


Alex said…
Not only that, but he would have the Bank of England have tremendous power. Is it right that a quango should have as much power as it does?

As others have said, this is just moving the deck chairs by Osborne. This crisis wasn't caused by the FSA. There was a bad response from it toward Northern Rock, but that just requires reform, not transfer of power to the BoE. Why would they have done any better?

And have people forgotten that Brown didn't create the FSA out of the ether, but created it by merging several different quangos that had existed pre-1997. So this is an incredible turn around of Tory policy. They opposed the tripartite system initially and wanted several quangos instead, now they oppose it in the other direction (though the FSA would still have Consumer protection powers, so technically they don't even want to reduce qango numbers on this one).

Sigh. Labour's policy was bad, but at least there were some signs of sanity. Not so with the Tories it seems. Whee...

Popular posts from this blog

Concert and Blues

Tallinn is full tonight... Big concerts on at the Song field The Weeknd and Bonnie Tyler (!). The place is buzzing and some sixty thousand concert goers have booked every bed for thirty miles around Tallinn. It should be a busy high summer, but it isn´t. Tourism is down sharply overall. Only 70 cruise ships calling this season, versus over 300 before Ukraine. Since no one goes to St Pete, demand has fallen, and of course people think that Estonia is not safe. We are tired. The economy is still under big pressure, and the fall of tourism is a significant part of that. The credit rating for Estonia has been downgraded as the government struggles with spending. The summer has been a little gloomy, and soon the long and slow autumn will drift into the dark of the year. Yesterday I met with more refugees: the usual horrible stories, the usual tears. I try to make myself immune, but I can´t. These people are wounded in spirit, carrying their grief in a terrible cradling. I try to project hop

Media misdirection

In the small print of the UK budget we find that the Chancellor of the Exchequer (the British Finance Minister) has allocated a further 15 billion Pounds to the funding for the UK track and trace system. This means that the cost of the UK´s track and trace system is now 37 billion Pounds.  That is approximately €43 billion or US$51 billion, which is to say that it is amount of money greater than the national GDP of over 110 countries, or if you prefer, it is roughly the same number as the combined GDP of the 34 smallest economies of the planet.  As at December 2020, 70% of the contracts for the track and trace system were awarded by the Conservative government without a competitive tender being made . The program is overseen by Dido Harding , who is not only a Conservative Life Peer, but the wife of a Conservative MP, John Penrose, and a contemporary of David Cameron and Boris Johnson at Oxford. Many of these untendered contracts have been given to companies that seem to have no notewo

KamiKwasi brings an end to the illusion of Tory economic competence

After a long time, Politics seems to be getting interesting again, so I thought it might be time to restart my blog. With regard to this weeks mini budget, as with all budgets, there are two aspects: the economic and the political. The economic rationale for this package is questionable at best. The problems of the UK economy are structural. Productivity and investment are weak, infrastructure is under-invested and decaying. Small businesses are going to the wall and despite entrepreneurship being relatively strong in Britain, self-employment is increasingly unattractive. Red tape since Brexit has led to a significant fall in exports and the damage has been disproportionately on small businesses. Literally none of these problems are being addressed by this package. Even if the package were to stimulate some kind of short term consumption-led growth boom, this is unlikely to be sustainable, not least because what is being added on the fiscal side will be need to be offset, to a great de