Ok, I am going to make a confession now which will probably damn me forever. In my foolish youth, I once used to work for a bank.
There, I’ve done it. I’ve come out. I hear a faint chorus of “aha”s and knowing looks being exchanged. On the Labour Party’s own internal Axis of Evil, I suppose that puts me up there with Iran and North Korea. I should add that, on the day of the 1997 election, when they found out I was a Labour candidate, an email did the rounds, insisting on my immediate dismissal as a socialist infiltrator. They were joking (at least, some of them were).
In the end, I lasted a few years more as a backroom boy. It wasn’t, frankly, the right place for someone who was “a bit of a lefty”; now I do other things, which I like better. But it was a good insight into another side of life: and perhaps a bit of balance in the membership enriches us in the Labour Party (it’s notable that fairly few senior Labourites have ever worked in the private sector, let alone the financial sector).
A lot of the people who worked there, although by no means all, didn’t want for much financially, that’s true. They also often had very different politics: but, above and beyond that, you know what? In the end, their lives boiled down to the same concerns as yours or mine: over-stressed, long hours, worrying about their kids and dealing with job insecurity (which, believe it or not, can be rather high in some banking jobs). Do we have to judge them because they might be better-off than average, or have different priorities? No. Are they evil? No. Some of them even vote Labour. We are no better or worse than these people, they just made different choices. Worst of all, the prevailing disparagement of a whole industry is currently crippling any rational debate on the solutions.
So, if we can hold off for a second from bashing them and dig beneath the surface arguments, we see that banking is merely another industry, which has some important problems to be dealt with. It is also one in which, as it happens, we Brits excel.
Now, it is obvious that, if left to their own devices, the Tories will under-regulate their friends and donors in the banks. The good news is, any issue with Tory vested interests is a political opportunity for Labour, because they will do it badly. So what we need to do, to succeed, is propose how to do it well. The bad news is, if we go to the other extreme, we will be giving an answer which is ineffective and lacking credibility.
We should not craft our policy through fear: because we’re afraid “of big business”. Or “that all the City business will go to Frankfurt” (that is, and always was, an empty threat. Ever been to Frankfurt? No contest as a city to live in. End of story).
Conversely, neither should we do it through revenge: “they hurt us, so we’ll hurt them”. No, we should go for a measured, pragmatic approach, neither one extreme nor the other, because is the right thing to do. For starters, here are four areas where we could do with reviewing our thoughts:
1. Blame for the crash. Perhaps this is counter-intuitive, but it is futile to blame bankers for the crash. Politicians (that is, we and the Tories) were to blame for the crash for the ill-advised consensus not to regulate banks better. Brown and Miliband have both agreed that, in part at least. We should not trying to make the selling of too-complex products a moral issue when it is not. If you fail to regulate a market well, bad practice will occur. Bank directors were, however, guilty of poor management and even poorer self-awareness for then trying to pay big bonuses with public money. The Tories were also to blame for not pressuring them to do otherwise.
2. Regulation. It is foolish to talk blithely about “tighter” or “looser” regulation. What is needed is the right regulation. For example, the principal problem with asset-backed loans was that they were allowed to be sold with incomplete information (i.e. people who bought them didn’t understand them). So, you limit who can buy and improve the quality of information. What you do not do is say either that we should carry on as before, or declare dramatically “these products should never again be sold”. Both are wrong.
3. Taxation: fair and enforceable, not punitive and pie-in-the-sky. The Balls proposal for extending the bonus tax is arguably fair, but still looks like populist revenge. Secondly, such taxes are probably not enforceable as anything more than a one-off, for reasons I am happy to debate in the comments.
4. “Over-reliance” on banking income. The reaction to the financial crisis has made it fashionable to talk up manufacturing and to say that we have “too much reliance on City income”. Whilst we might have sympathy for that as a historic argument – and I genuinely do – the alternative is not very convincing, simply because it’s a little too late. The harsh truth is that the Thatcher years’ destruction of our mainstream industrial base is an unfortunate omelette we can do little to unscramble, especially with mainstream production moving east. Encouraging some niche, specialist industry, yes, and welcome. Widen our skills base, yes. These are sensible long-term projects.
However, the argument against “over-reliance” is not thought through: it implies, bizarrely, we should shrink the City. To wit, we must turn away financial sector companies who want to come to London, in order to focus on companies that may or may not arrive and that we may or may not be skilled-up to attract. This is madness. Surely, in the short-to-medium term, it would be better to stabilise an existing, generally thriving economic cluster rather than trying to shrink it to create a new one?
In short: British banking has had a bad time over recent years and it certainly needs a thorough overhaul. But let’s have a credible attitude to where the blame lies; forge a policy with the right regulation; the right taxation; and let’s not kid ourselves we are going to shrink it. We won’t, and neither should we.
It’s tricky. If we get it wrong, we’ll be confirmed as anti-business wealth-damagers, not to be trusted with the economic valuables. If, on the other hand, we resist the temptation to go to extremes and nuance it right, it could be an unexpected win for us, because the Tories have vested interests that we don’t, and will do it badly.
This post first published at LabourList
This post first published at LabourList