Following Ed Balls' appointment, the two coalition parties have been quick to point to Labour's regulatory failures. But the consensus on light touch regulation came from all three parties.
Following Ed Balls’ appointment as shadow chancellor, the two coalition parties have been quick to point to regulatory failures made by the Labour government in office. But the consensus on light touch regulation came from all three parties.
The Financial Times quotes Michael Fallon, Tory deputy chairman and their attack dog on economic matters:
“Ed Miliband and Douglas Alexander can complain all they like about Labour’s terrible record on banks, but Ed Balls, the man responsible for 13 years of regulatory failure, is now back in charge of their economic policy.”
Yet in June 2006, George Osborne wrote in the Telegraph:
“Many of the regulations that affect the City, such as the Markets in Financial Instruments Directive, originate with the European Commission.
“I fear that much of this regulation has been burdensome, complex and makes cross-border market penetration more difficult. This is exactly the wrong direction in which Europe should be heading and it threatens the global competitiveness of the City of London.”
Indeed, as late as August 2007 – when credit market were starting to freeze – the Sunday Telegraph revealed that the Tories had “a radical programme of cuts in red tape and regulation aimed at saving British businesses £14 billion a year”.
The Lib Dems like to claim that Vince Cable saw the crash coming giving Nick Clegg more license to make claims such as:
“If you ask yourself who was in charge of the City when they were gorging themselves on bonuses and lending irresponsibly … who was whispering into Gordon Brown’s ear budget after budget, creating this huge fiscal deficit – the answer to all of those questions is Ed Balls.”
But as Channel 4 Fact Check has documented, Vince Cable had been a supporter of Gordon Brown’s light touch economic policy. Speaking in the House of Commons in support of the Labour government’s Financial Services and Markets Bill which established the Financial Services Authority:
“I want to express broad support for the bill, whose philosophy and whose architecture of financial regulation reflect a broad consensus.”
According to the New Statesman, Cable said “No one is arguing for an increasingly severe, more onerous and dirigiste system of regulation.” Any regulation, he said, should be “done on a light-touch basis”.
On the regulation of the City before the financial crash, politicians of all parties certainly were all in this together.
45 Responses to “Lib Dem, Tory and Labour all in this together on financial regulation”
Éoin Clarke
Good article Will,
On 4 Apr. 2006, The Independant also carried comments by George Osborne complaining of “over regulation” he accused the government of “furring the arteries”. I am sure there are countless of examples of this kind of talk.
Labour should be honest with the UK voters and admit that in order to get elected, they were forced between 1979-97 to buy into the post-Thatcherite consensus in accepting the Free-Market economy, and that a) it backfired on the voter b) it was never really in Labour’s DNA in the first place…
It seems a bitter twist of fate to be reduced to swallowing Thatcherite monetarism only for it to come back and bite you in the nether regions.
John Rentoul
RT @leftfootfwd: Cable, Osborne and Balls "all in this together" on bank regulation http://bit.ly/gVhQSy
Matt Lacey
Libs, Labs and Tories 'all in this together' in kowtowing to bankers on regulation: http://bit.ly/gVhQSy
Rhiannon Lowton
RT @JohnRentoul: RT @leftfootfwd: Cable, Osborne and Balls "all in this together" on bank regulation http://bit.ly/gVhQSy
Mike Thomas
NO! They absolutely were not ‘together’. The blame for the faulty regulation lies squarely with Gordon Brown and Ed Balls.
These are the exact words of the Shadow Chancellor on the 11th November 1997 during the debate on the Bank of England Act.
The Bill will hive off debt management to a new quango under the Treasury. We know that funding policy is an intrinsic part of monetary policy, and the Bill will leave the Bank as a one-club golfer without even a putter left in the bag. How will the Treasury, the Bank and the new board co-operate to handle monetary policy? If they need to get together, why is it necessary to separate them in the first place?
With the removal of banking control to the Financial Services Authority—the “super-SIB”—it is difficult to see how and whether the Bank remains, as it surely must, responsible for ensuring the liquidity of the banking system and preventing systemic collapse.
What happens if the needs of the banking system conflict with those of the inflationary target? That has happened in the past in the United States, and it could conceivably be happening in Japan. I understand that there is a suggestion that a committee is to be established to work between the Bank, the FSA and the Treasury to try to cope with that sort of problem. If that is necessary, why is it necessary to hive off powers in the first place?
That brings me to the creation of the FSA as a super-SIB. The Bill is only part of the process, but it will on implementation directly conflict with pre-election statements. More importantly, concerns expressed by the Chief Secretary when in opposition may, although he has disowned them today, prove well founded.
The coverage of the FSA will be huge: its objectives will be many, and potentially in conflict with one another. The range of its activities will be so diverse that no one person in it will understand them all. Its structure will be as complex as those of the organisations that it replaces, if not more so. Practitioner involvement is likely to diminish, and costs are likely to escalate as salaries are equalised upwards.
We have no objection to the objective of trying to bring greater simplicity and one-stop shopping to the business of financial regulation, but we fear that the Government may, almost casually, have bitten off more than they can chew. The process of setting up the FSA may cause regulators to take their eye off the ball, while spivs and crooks have a field day. We shall observe closely what is going on in the development of the proposed legislation.
Labour bungled the regulation, they were clearly warned by a host of MPs and the Shadow Cabinet at the time.
Advice they arrogantly chose to ignore.