Labour must challenge the governor of the Bank of England

2nd November, 2013 9:12 am

Today’s CLASS-YouGov poll should be a confidence booster for Labour. I write ‘should be’ because Labour’s deafening silence in response to the provocative speech last week by Mark Carney, the new Governor of the Bank of England, indicates Labour’s continuing lack of confidence. This is dismaying given that the City of London is an industry that is as much loathed by the British public as the energy sector; an industry that “generates instability and rising inequality” – to quote Martin Wolf in the Financial Times.  This is an industry that allocates 34 per cent of its lending to financial institutions and a mere 1.4 per cent to manufacturing. And as the economy struggles to recover, the City shrinks its lending to SMEs.

Frances Morrell, the wise and effective, if now neglected, Labour leader of the Inner London Education Authority back in the 1980 and 90s, once taught me a profound lesson. Leaders are not born, she said. They become leaders. It takes time. They grow into the role.

Ed Milliband ought to be feeling really confident about the way he has grown into his role. The decision not to support an American invasion of Syria has had global consequences. The vote, the stance of the Parliamentary Labour Party, changed the balance of power in the world. It forced the most powerful leader into a retreat. It did so, and achieved global impact, because it reflected the will of the British people, who for years have tried to lead their leaders away from engagement in stupid and destructive wars.

Ed and the Labour Party ought to be proud of that vote and its global impact.

Ed has done more. He has shaped the national political agenda – with his attack on the energy oligopoly, and the focus on falling living standards. Not just for a day or two. Not just for a week. But for weeks on end. Because Ed is reflecting the will of the British people, he has placed the government – with its huge resources and firepower, backed by the incandescent fury of the Daily Mail – on the back foot. Each day the Daily Mail exposes its fear of Ed by protesting too much. It reflects Conservative anxieties that voters support Ed’s stance, and succeeds only in looking and sounding defensive.

Putting the government and the Daily Mail on the defensive is a considerable political achievement which should make Labour really confident.

And yet last week the Labour Party had nothing to say when the City of London’s newest and most zealous defender – the governor of the Bank of England –  promoted a vision of the UK economy as one predominantly based on global finance: a kind of “greater Hong Kong” in Martin Wolf’s words.

As the BBC’s Robert Peston noted in his blog, Mark Carney:

“used a rhetoric about how valuable big international banking can be to the prosperity of the UK that not even the pro-City Chancellor of the Exchequer has felt able to deploy since the debacle of five years ago.”

In response to this provocative and highly political speech from a civil servant who has been appointed to act as “Guardian of the Nation’s Finances” – Labour’s Shadow Chancellor and front bench have said not a word.

Does this mean the front bench were consulted about the speech before it was made? If so, did they approve its direction?  If not, why the long silence?

The new governor, Mark Carney – once an employee of Goldman Sachs – has moved too fast; has revealed his hand too soon in defence of the overweening power of the City of London.  He must be checked, because the City of London continues to pose a profound threat to the current and future prosperity of the British people. He can only be checked by the real possibility of a Labour government determined to subordinate finance to the interests of the British people as a whole, and not to a tiny, global financial elite.

A YouGov-Cambridge ‘Public Trust in Banking Report’ in April, 2013 shows that 83% of the public surveyed thinks “bankers are greedy and get paid too much” and 80% believe that “banks aren’t doing enough to get out of this economic crisis which they helped cause.” 47% believe that they would have “more trust in those big banks which receive taxpayer bailouts if they had been fully nationalised and so were now fully owned.”

If Labour wants to rebuild the public’s trust in its handling of the economy, it will be vital to sever the artery between the Labour Party and the City of London – and to stand up to the City in just the same way it has stood up to the energy behemoths.

To win the next election, Labour must show itself to be on the side of the British people, not global finance. It must show itself willing to re-balance the economy away from finance, and towards a more fully employed, more socially useful productive sector.

A first step would be to summon up the confidence to challenge the governor of the Bank of England.

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  • Quiet_Sceptic

    So what about the tax revenue?

    This article conveniently ignores the consequences of its proposals. If we want to bear down on the City, on financial services, fine that’s a choice we as a party could make but we need to recognise and accept the consequences; tax revenues will fall and some public services will have to be cut as a result.

    Whilst banking may be unpopular, the public services that its taxes pay for are not and you can’t have one without the other.

    • Mr Arthur Cook

      Nationalise the banks and keep the all profits.
      We managed to nationalise them when they were making a loss!

      • The_Average_Joe_UK

        Funny, nationalise the banks and there will be no profits. The Labour parties finances are out of control, the bank that is associated with the Labour party is bankrupt and you think you can run something as complex as the city of London?

        The merest hint of this would destroy London and result in poverty for all. Fortunately the British people would never vote for this emotional nonsense.

        • Mr Arthur Cook

          “The nationalised railway company operating the East Coast main line handed £208.7 million back to taxpayers last year,”

          • The_Average_Joe_UK

            Disingenuous comment. You cant compare a monopolistic local utility with an international service industry based on confidence.

            Further proof that the left have difficulty with elbows and other parts of their anatomy.

          • treborc1

            Well yes we all know that the banks and the financial sector have been on great success story, no need to nationalize any of them due to the great success.

          • The_Average_Joe_UK


          • treborc1

            Not actually it’s called sarcasm.

          • Mr Arthur Cook

            We seem to have lost out grip on recent history.
            A good proportion IS in public ownership because “confidence” collapsed under the weight of incompetence, greed and the narrow self-interest of a minority.
            Far from being panicked by having their “assets” seized by the revolutionary left the banking community was happy to see the state (you and me) take over their crippled system, pay off their bad debts, pay off the compensation for their systematic swindling and nurse them back to profit…….at which point…..”we’d now like them back please…..because the state can’t own and run banks can it?”.
            The banks have stabilised and headed towards profit owned by the state and operate at arms length.
            Why must we run them when they are making a loss but we can’t run them when they make a profit?

            Of course we all know the answer why and it has nothing to do with economics or banking but the self interest of political elites and their cronies. Wealth gives access to political power and that political power is used to maintain and grow the wealth which feeds it.

        • Brumanuensis

          Funny, nationalise the banks and there will be no profits

          Not that I favour the mass nationalisation of the financial sector, but [citation needed].

      • JoeDM

        WARNING: This thread contains nuts.

        • trotters1957

          Troll. Feck off.

    • Brumanuensis

      So what about the tax revenue?

      But this is precisely the sort of short-termist thinking that prevailed prior to the financial crisis. The financial sector was tolerated because it raised lots of money – ditto the property bubble – but when both imploded the tax take collapsed and blew a huge hole in public finances. Revenue from a financial services sector that is over-large, over-leveraged and excessively risky, is no revenue at all.

      • treborc1

        But loved by chancellors of all political parties.

      • Quiet_Sceptic

        In some respects I agree, I’m sure many would trade the City for the stable, durable industrial base of say Germany.

        But we don’t have Germany’s industrial base, we don’t have the companies, we don’t have the supporting infrastructure and we don’t have the skilled workers.

        We do have the City, it provides a lot of highly paid jobs and throws off a lot of tax, if we shrink the City then we need to replace it with something.

        What would you replace it with?

        The danger is, we turn our nose up at the City, we shrink our financial sector, we fail to build up our industrial base (our record here isn’t exactly good) and then we have nothing.

        • Daniel Speight

          But a political decision was taken by the Thatcher government to move support from industry to the City. This started us down the road of deindustrialization that New Labour continued along. This reliance on a less regulated City came back to bite us in 2008, wiping out most of the gains the City had provided. The Germans never made this change in the 1970s so continued to have a solid industrial base.

          Now that doesn’t mean it will be easy to reverse direction. Pulling the plug on the City without anything taking its place would be a disaster. The least we can do to begin with is to impose better regularity discipline on the City’s worse practices. (It now seems the banks have been fixing the forex market as well. Is there anything they haven’t corrupted?)

          As far as rebuilding industry, a blank slate isn’t the worse place to start from as many of the Asian Tigers has proved. Now all Keith Joseph’s lame ducks are no longer with us we can start with the most modern technologies. The only thing I would question is whether EU membership would be a help or a hindrance in doing this.

          • The_Average_Joe_UK

            Government does not really get involved in the long term viability of business. Its not a sustainable position. British industry was in a parlous state for a number of reasons including:

            1. Under investment

            2. The worst industrial relations of the western world

            3. Poor management

            4. State intervention, specifically BL and BT

            Economies and companies evolve with demand. To say that Government policy drove de-industrialisation paints a false picture. Those industries in the form that they were past their sell by date and pouring Millions into them prevented resources going into anything that was long term sustainable.

            New Labour continued along the path of letting the market decide what was good for Britain and yes its regulatory framework nearly killed us.

            The Germans never made this change in the 1970s because they never had red Robbo, Scargill, Gormley et al. Just look at the quality of products they were putting out in the 60’s,70’s, 80’s and today and you can see there is no comparison that can be made.

            What the left doesn’t get is that there is no need to pull
            the plug on the City. Why do we need to? The author clearly falls into the lefty world of the city is bad menatality, but I’m exceedingly happy that we have a Governor of the BoE who says lets make the most of it and increase the safety. That concurs with your position “to impose better
            regularity discipline on the City’s worse practices.”
            Yes there is work to be done and the latest issue in Barclays paint a bad picture.

            With the right attitude we could be epic, that means a vision for the UK – a hardworking and caring society. I see high tech manufacturing, great industrial relations, the world market and ditching the bureaucratic and expensive EU as the way forward.

            None of the parties is offering this, our politics are broken with power hungry rhetoric jockeys.

        • Brumanuensis

          The danger is, we turn our nose up at the City, we shrink our financial sector, we fail to build up our industrial base (our record here isn’t exactly good) and then we have nothing. It’s always easier to build on what you’ve got, so continuing to build on our strength in financial services is a far more certain path than taking a punt on shifting ourselves strongly toward manufacturing.

          I agree, but that misses two important points. First, the UK manufacturing sector already makes a larger contribution to GDP in terms of Gross Value Added than the financial and insurance services sector. In 2011, the latter contributed £125.4 billion ( ) and in 2010, the former contributed approximately £139 billion ( ). I’m not trying to write off the financial and insurance services sector, but we shouldn’t over-state its importance.

          Second, Pettifor isn’t attacking most of that sector’s activities, but only its riskiest elements, which make up a subset of the GVA total. The UK might generate slightly less income from a more restricted F&IS sector, but the additional stability will include long-term savings too. Ultimately, the UK’s surplus in services owes more to things like education and the wider white-collar sector. The government, stupidly, has harmed the former through its immigration policies. In any case, the resurgence of the UK car making sector, the one area of manufacturing that has avoided the slump of the last few years, is a sign that the UK can do industrial policy well.

    • trotters1957

      Funny you seem to have forgotten the banking crisis that has been bailed out to the tune of hundreds of billions in cash and guarantees. Most of the activities of the City of London are zero sum games. One person wins, another loses, there is no real profit made.

  • The_Average_Joe_UK

    Ann Pettifor, shame you. Pulling a selective quote like that to score political point is not how an economist should behave. As peston says you have to look at every he says. Perhaps the readers of this article might like to go to Pestons Blog and read the whole thing to understand the full context.

    “It is not for the Bank of England to decide how big the financial sector should be. Our job is to ensure that it is safe. The UK can host a large and expanding financial sector safely, if we implement a reform agenda that extends well beyond domestic banking.”

    I read that as taking a lead in driving safety in the sector. When will the left learn that the whole truth is important. You always get found out when presenting half the argument.

    • Brumanuensis

      Sorry, where is the selective quote? Would you care to point it out for the rest of us?

      • The_Average_Joe_UK

        Are you thick? Perhaps if you google for the Peston article you might enlighten your Brummie self.

        • trotters1957

          Troll . Feck off

          • treborc1

            Your not going to win an argument by losing your cool if you think he’s a troll then stop feeding him and do not reply.

          • The_Average_Joe_UK


        • Brumanuensis

          I see no selective quote in Pettifor’s argument. She’s quoted Peston’s analysis of Carney’s speech, not Carney himself, so quoting Carney in response is completely beside the point. Given that Peston makes the cited observation in spite of including the same quote from Carney you’ve just used, I think you’re being a little hasty to conclude that Pettifor has traduced either Carney or Peston.

          As a word to the wise, I would remind you that the internet does not mean you have to dispense with basic manners, especially when I wasn’t impolite to you.

  • The_Average_Joe_UK

    Ann, why don’t you club together with a few of your friends, open your own bank and work differently?

    Perhaps Derek, Mr A Cook and a few of his mates could start something? Perhaps with the backing of Unite?

  • jaime taurosangastre candelas

    Given Ann Pettifor’s work to date, I am surprised she wants to go on such an attack without having anything as a backup to the financial services industry, which is about 10% of GDP, and which employs around one million Britons.

    Kick it down, kill it. But what takes its’ place?

    Could anyone imagine another industry being so attacked on LL, by Labour supporters?

    • The_Average_Joe_UK

      How about an Oil refinery in Scotland?

      • trotters1957

        Feck off

  • Chris Cook

    This is missing the point.

    The fundamental issue is that both wealth, in terms of asset ownership, and income are now so concentrated in the hands of the 1% that there is insufficient purchasing power in the economy among the 99% for the economy to recover.

    Or another way of putting it is that the problem is a shortage of creditworthiness, rather than credit.

    At zero interest rates Central Banks – whatever banking rock star leads them – have no policies which work. Only fiscal measures – and I do not mean barking mad austerity – can address the fundamental problem.

    So Carney may as well put his feet up: he’s as much use as a chocolate teapot.

  • Brumanuensis

    The overall problem with the financial sector is that it is lending too match for mortgages – assisted by the idiotic ‘Help to Buy’ scheme – and not enough for businesses, where amounts have only just started to increase after years of falling, even after FLS was introduced. It’s typical of Osborne that after years of prattling about ‘rebalancing’ he has effectively abandoned significant deficit reduction until the next Parliament and is now relying on a new housing and consumer credit boom to fuel economic recovery. Like the Barber Boom and the Lawson Boom, it’ll all end in tears.

    • The_Average_Joe_UK

      God give us strength.

      • trotters1957

        Feck off, then, troll

      • Brumanuensis

        Thank you for your cogent, if enigmatic, analysis. But please, do expand. I’m all ears.

  • Balls has to go then. There, said it.

  • Steve Stubbs

    Getting back to the actual article, could the fact that last week the Labour Party had nothing to say possibly be because they actually agree with him?

  • Steve Stubbs

    And I would hold back on bragging on the total mess in Syria until we see the eventual outcome, which is likely to be the establishment of yet another radical Islamic shambles of a country, or the maintenance of a despotic dictatorship…….. Either being not a good result in my view of the world.


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