Tow key things were missing from the Budget – not surprisingly since the nearness to the election rendered their predictive authority otiose.   The first has been widely noted – any detailed specification of the public expenditure cuts proposed.   The second however has received little or no comment at all.   That is that after the near-total collapse of the financial and economic system there should be a full-scale Inquiry or Commission into the functions, methodology and impacts of modern banking, with detailed recommendations as to how financial markets can be made to operate safely, efficiently and sustainably.

Every time a high-level major disaster occurs in public life, with disturbing implications for the life of the nation, a top-level inquiry is set up with a wide brief to investigate the causes and handling of the disaster and to recommend reforms to prevent any recurrence.   There has been no greater financial/economic disaster for almost a century than the huge recession since 2007.   Yet no inquiry has been set up or is planned.   Why not?   It’s not difficult to see the reasons.

It would expose the failure (in 2002-7 as in 1986-9) to damp down or halt the bloated credit and housing bubbles that contributed so drastically to the collapse when the derivatives scam broke.   It would reveal embarrassingly the mishandling of monetary policy by the newly created MPC which by keeping interest rates too low for too long encouraged the excessive leveraging which laid the foundations for the out-of-control boom.   It would uncover the recklessness with which fancy new financial instruments – credit default swaps, collateralised debt obligations, structured investment vehicles – were allowed to proliferate explosively with very little understanding of the risks they entailed.   And it would display starkly the negligence of the regulatory order as well as the visceral greed of the bonus system driving an uncontrolled expansion.

But if for these reasons Government (i.e. No.10) won’t set up a Commission of Inquiry, why doesn’t Parliament (i.e. the newly-created Back-Bench Business Committee of the House) set up its own?   Or since the City fund managers are always grumbling (rightly) about the exorbitant fees charged by investment banks to underwrite rights issues, why don’t the fund managers set up their own independent and rigorous inquiry?   I’d like an answer.

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