Fraser Nelson
Already a subscriber? Log in
A few areas look ripe for exploration. The first is Threadneedle Street. For it is the Bank of England that controls the supply of money to the British economy — leaving it to the bankers to dole it out as they see fit. Bankers are no more responsible for the debt crisis than barmen are for Britain’s oft-lamented drink problem. When money is tight, bankers are picky about whom they lend it to. When it is being churned out as if from a never-ending fruit-machine jackpot, as the Bank of England allowed for much of the last decade, bankers are — well — not so careful.
In its hearings, The Spectator will ask whether this all started off in the form of a basic analytical error: blind faith in the inflation targeting which worked for the Tories in the 1990s but was useless in a more truly globalised era when prices were being dragged down by cheap Chinese imports. The Bank of England pointlessly fought to keep prices up by flooding the economy with dangerously underpriced debt. This sent asset prices — from houses to fine wines — into orbit. It also unleashed a flood of easy money, on which the City gorged.
While there was greed for bonuses, it was by no means restricted to the Square Mile. For Mr Brown’s Treasury received a 40 per cent slice of every bonus doled out, at a time when it had embarked on the largest expansion of state spending in Europe: tax from bonuses paid for an army of bureaucrats and public sector workers. Government grew addicted to the revenue that the financiers produced. The bankers and the state were united in their desire for quick profit, and both found ways to justify to themselves why the risks being taken were not so risky after all. Ministers had a vested interest in not asking too many questions about how the banks made their money.
Crucially, although the recession is now global, the collapse of banks is not. Spain and Canada also had a housing boom, yet neither has a single collapsed bank. Indeed, Spanish banks have been hoovering ours up: Abbey, Alliance & Leicester, Bradford & Bingley, Cahoot and Carter Allen are all now divisions of Grupo Santander. It will not do to shrug and say that no one expects the Spanish acquisition. Spain got something right, which Britain got badly wrong. The Spectator’s inquiry will seek to establish precisely what this was.
We will also ask whether London was silently turning into the Peckham of the globalised world. How much truth is there in the Wall Street rumour that Lehman Bros was corrupted by the antics of its London division? Was the lax regulation linked to the fact that the government was taking that 40 per cent cut of bonuses? The City is notoriously difficult to penetrate, so any tips our readers may have would be especially welcome. Why did British banks become the most leveraged outside of Iceland — were they instinctively more reckless? Or simply operating under the loosest regulation?
And where was the parliamentary scrutiny? John McFall has made his name as Treasury select committee chairman by shouting at bankers, but was more guarded with HM Treasury itself. So there was no one to expose how the Treasury had been reduced from a bastion of probity into Europe’s largest innovator in governmental debt concealment. From PFI off-balance-sheet accounting to pooled debt scams, HM Treasury became the master of all the tricks that Mr Brown affects to be so appalled to discover at work in the banking sector.
This helps explain Mr McFall’s fury. He needs a scapegoat too, as for seven years he failed to spot what was happening in front of his nose. He was a watchdog who was — as he likes to say of the bankers — ‘not just sleeping, but comatose’, awaking only to bark at passing capitalists. As long as government fixes the membership of the committees, of course, they will never be properly independent. The Spectator’s inquiry will ask how to ensure that Parliament can act as a genuine check, rather than a rubber stamp, on the Treasury.
The Spectator’s inquiry will not waste too much time on Gordon Brown. He designed the banking regulations, raided pension funds, concocted ‘stability’ rules and masterminded a debt concealment programme. For all this he will be punished on election day. For Britain to recover to where we were in 1999, at the peak of our economic stability, the errors of judgment which accompanied the Brown era must be identified and corrected.
The Prime Minister has long understood the truth in Orwell’s saying that he who controls the past controls the future. The future of British politics — and, arguably, of British capitalism — will depend on how we interpret what just happened. Mr Brown may be resigned to losing the election, but by blaming the banks he may still win the argument. That is why so much is now riding on the battle to define the past. And armed with the suggestions, theories and insights of our readers, it is one The Spectator will enthusiastically join.
Also in Politics
Also by Fraser Nelson
Latest
Comments
Join the debate for just $5 for 3 months
Be part of the conversation with other Spectator readers by getting your first three months for $5.
UNLOCK ACCESS Just $5 for 3 monthsAlready a subscriber? Log in