This weekend a top-level EU Ministerial meeting took place on bank regulation – not that it got much attention compared with MPs’ (and increasingly MEPs’) expenses, even though it’s a thousand times more important. No awards for guessing which country took the lead in resisting reform. Britain yet again, a supposedly Labour-led Britain (though not actually Labour at all over this matter) ostentatiously blocked even the minor change the Commission was proposing, for fear of disadvantaging City competitiveness. Even though everybody else recognises that recklessness by the banks was the major cause of the current financial criis and economic downturn, Gordon Brown it seems thinks there is no limit to the degree that the banks should be protected and defended. He even assured me in the House last week in PMQs that bank lending to small businesses had risen substantially in the last few months when the Government’s own official statistics reveal such spending is completely flat (i.e. M4 money supply growth has fallen steadily from 17% a year in mid-2007 to just 0.3% a year last month). Yet even Osborne is now railing against City short-termism while Brown remains silent.

The real problem is that part of the New Labour repudiation of Old Labour (regarded by Blair as more the enemy than the Tories) was focused on embrace of the City, banks and (so far as was feasible) the financial markets. Neither Blair nor Brown have wavered from this over 15 years. They took deregulation of finance even further than Thatcher, boasted of ‘light touch’ controls which was a euphemism for unfettered markets, and made the City into one of the world’s largest tax havens so that multi-millionaire members of City boardrooms paid less tax than their cleaning ladies. Brown in particular shelved the Cruickshank Report’s recommendation of curbs against bank profiteering, protected tax havens by blocking the EU’s withholding tax on remittances aimed at extensive tax avoidance, pared down the bank deposit insurance scheme, and at the request of the CBI and the banks cut back HMRC staffing and starved the FSA of resources. With a record like that, it is delusional to expect radical reform of finance to prevent a recurrence of this near-global meltdown, or indeed much reform at all.
Specifically, nearly 2 years since the financial crisis began and 8 months from the time last October when the global system was seriously close to collapse, none of the necessary measures have yet been undertaken. Deposit banking has not been separated off from investment casino banking. The over-dominance of the largest banks has not been cut back, so that at the next crisis they will still be too large to be allowed to fail. The independence of the credit rating agencies has still not been secured, so they still operate with an acute conflict of interest. There are still no mechanisms for regulating derivatives trading which was at the heart of the crisis. The toxic bonus culture has still not been dealt with, and will revive again as soon as the recovery gets fully under way. Capital reserve ratios have not been adequately tightened, and still no rules cover how banks gamble on the markets with their own funds. Despite the flurry after the G20, no tax havens have been shut down, and it is estimated that corporations still cheat the world’s Treasuries of some £160bn a year from transfer mispricing.
The Government boasts of doing so much to save the world from recession (or is it just saving the banks?). But where in concrete terms is the evidence?

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