Playing party politics over Libor could wreck one of Britain’s leading industries

by Peter Watt

You’ve got to say that the banks are shockingly bad at their own PR.  The fact that reckless lending played a significant part in the cataclysmic global downturn didn’t exactly endear them to people.

Obscenely high bonuses that seem at odds with the overall performance of the company don’t help.

And then to top it off they’ve been fiddling rates of interest so that they made bigger profits and created a false sense of their own economic strength!  Understandably therefore many people right now wouldn’t spit on a banker if they were on fire.

But in the furore we seem to be forgetting that this is also an industry that employs 1.1 million people in the UK.  That contributes 9% of the gross value added in the economy as a whole, generates 7% of all tax receipts (£35.7 billion) and produces a trade surplus.

So the current crisis in our financial sector is a potential crisis for our already fragile economy.  We simply cannot afford for this mess to continue, there is too much at stake.  It is right therefore that all parties are keen to restore the credibility of the UK’s financial sector.

If people around the world fear that our financial sector is prone to fraud then they will take their money elsewhere.  It’s not like moving a factory or an industrial complex; they can simply move their capital with a phone call or click of a mouse.

And if credibility is to be restored or maintained then decisions need to be taken about what the right balance of regulation is and who polices it.  And there are the Vickers proposals to implement splitting retail and investment banking.  Big issues that need to be sensitively but robustly handled if this vital industry is not to be further harmed.

Instead we have a slanging match between the parties.

The hundreds of thousands of bank workers earning modest wages must be crying into their ledgers.

Both sides of the argument haven’t exactly covered themselves in glory.  Labour can hardly claim clean hands here.  It was after all Labour who deregulated the city in the first place.  Yes, they can rightly say that at the time the Tories wanted them to go further but the fact is that Labour was in charge at the time.  And then there is the issue of whether or not members of the then government were involved in discussions with banks about their LIBOR rates – the truth will no doubt emerge.

Whatever, it is hard to see any inquiry giving Labour an entirely clean bill of health when it comes to banking.  And over the next few days we have the prospect of Labour refusing to join a parliamentary inquiry into the LIBOR scandal.  There is indeed a strong argument to be made for some sort of wider independent inquiry.  But if Labour refuse to join in a parliamentary inquiry after losing a vote on establishing a judicial inquiry then the party risks looking petulant.

There is also a further problem for Labour.  Many members are instinctively anti-bank.

All that making money along with an over-representation of Tories and ‘toffs’ plays to class prejudices.  It is what makes some of the rhetoric of the left so over the top and the zeal with which many pursue “casino capitalists” all that more zealous.

But it also means that even when Ed Miliband is being reasonable on the issue of bank regulation he is seen by many as banker bashing.  It is after all what people expect him to do.  It’s like the Tories and hospitals – people expect them to damage them whatever they say.

But the Tories can equally hardly claim to be playing with a straight bat here.  Put aside that they have airbrushed their more laissez-faire attitudes to banking from history, they now seem determined to politicise the crisis.

Instead of pursuing wrong doers on bank trading floors they have sensed an opportunity to damage their bête noire Ed Balls.  At PMQ’s the prime minister seemed determined to nail Labour and were relishing the discomfiture on the opposite bench.   It was all good knock about fun but hardly the response of a serious government intent on dealing with a potential economic disaster.

And this was reinforced by the light toasting (it certainly wasn’t a grilling) received by Mr Diamond at the Treasury select committee later.  The much awaited session seemed to be more about finding a smoking gun that linked dodgy Libor rates with Ed balls or Shriti Vadera than anything else.

So once again we have a national crisis that impacts the very heart of our economy and upon which billions pounds of tax revenue and millions of jobs are dependent.  And the political parties’ response is to kick banks and bankers in order to damage their respective opponent.  It might make tactical opportunistic sense in the respective party HQs but it is hardly the sensitive but robust response which the situation demands.

Peter Watt was general secretary of the Labour party


Tags: , ,


6 Responses to “Playing party politics over Libor could wreck one of Britain’s leading industries”

  1. BenM says:

    Lets make this clear.

    Given all the rip offs and scandals that have erupted from the City, leaving aside the fact it wrecked the economy, being “anti Bank” is categorically *not* a problem.

  2. cynicalHighlander says:

    So corrupt industries should be left alone as long as the produce jobs/voters is this truly Labours thinking?

  3. Peter Watt says:

    BenM – lets make this clear – the financial sector is a huge employer and generator of income for the Country. Being anti bank definitely is a problem.

    cynicalHighlander – the whole industry is not corrupt, far from it. And I am not sure how you can take from the post that I think that where there is corruption it shouldn’t be dealt with:

    We simply cannot afford for this mess to continue, there is too much at stake. It is right therefore that all parties are keen to restore the credibility of the UK’s financial sector.

    “If people around the world fear that our financial sector is prone to fraud then they will take their money elsewhere. It’s not like moving a factory or an industrial complex; they can simply move their capital with a phone call or click of a mouse.

    And if credibility is to be restored or maintained then decisions need to be taken about what the right balance of regulation is and who polices it. And there are the Vickers proposals to implement splitting retail and investment banking. Big issues that need to be sensitively but robustly handled if this vital industry is not to be further harmed.”

  4. Anon E Mouse says:

    The whole country know that the city were let off the leash by Ed Balls and Gordon Brown with the ending “Boom and Bust” nonsense.

    To see Ed Balls blatantly lying on the BBC about his involvement yesterday was truly sickening.

    To think that the Labour Party has sunk to the stage where after a decade of rewarding the greedy bankers, city slickers and spivs like no government in history the shadow chancellor now thinks the electorate, his paymasters, are so stupid they will believe he’s not responsible is frankly shocking.

    The likes of BenM who post here do not realise how much damage they do to the party by constantly supporting the unsupportable and do the government’s job for them.

    Assuming he’s not a Tory plant despite his postings regularly seeming to indicate he probably is, why Labour supporters believe that the public would ever vote for this current bunch before they apologise to us for what they’ve done is beyond me.

    Message to Labour: We know you know we know what you did. Now apologise and move on….

  5. Ray_North says:

    I tend to agree with this – whether we like it or not, the left was just as complicit in the awful evolution of the banks as the Tories.
    We need a judicial enquiry so that the legislation that follows is thorough and wide-ranging and effective.
    The following (follow the link) is an article I’ve written suggesting just ten questions that I’d like the bankers to address – you may have others:
    http://www.allthatsleft.co.uk/2012/07/ten-questions-for-the-bankers/

  6. Mike Homfray says:

    Being ‘anti-bank’ is absolutely vital if this issue is going to be sorted

Leave a Reply