Category Archives: Finance

This week’s media selection: London advances on digital, retreats on financial; Budget politics; “clicktivism”

Evening Standard: Tech City boss: Britain can now follow London’s success

The new CEO of London’s Tech City, Gerard Grech, said that Britain can now cement its place as a global player in digital technology and entrepreneurial industries. Tech City has grown from 200 digital companies at launch in 2010, to 1,300 today. Grech will work on the “four Ps”; policy, partnerships, promotion and programmes, and will relay entrepreneurs’ concerns to government.

The Independent: New York replaces London as financial capital of the world

New York has over taken London as the world’s leading financial centre as the City’s reputation has been hurt by banking and market scandals, uncertainty over EU membership and the referendum on Scottish independence.

The Times: Osborne’s Budget gives the Tories new hope

Former Conservative Home editor, Tim Montgomerie, argues that while George Osborne may not have conquered Britain’s economic challenges he offers the best policies.

FT: Tories should not expect an election dividend

In contrast to Tim Montgomerie, University of Essex professor of government, Anthony King, argues that voters are more impressed by the squeeze on their real incomes than by Osborne’s triumphalist rhetoric. What makes matters worse, is the electoral system, which requires the Tories to be at least 11 points ahead in order to win a majority.

FT: Web activists tear down corporate walls

Large corporations are being forced into climbdowns by partly by social media and “clicktivism”. Twitter and Facebook are turbocharging critical messages as never before, making it harder than ever for companies to control the terms of public discourse. Companies are being dragged into a new world of “private politics”, which is led by activists, not government. This is forcing them into positions on issues that are only tangentially related to their businesses.

Advertisements

This week’s media picks

From a selection of media stories: Labour gives itself a little bit more definition. Do senior Tories think they will fail to win the next election? Here comes the Budget…

FT: Political risk rises high up the agenda in boardrooms

Business leaders are feeling under pressure on a range of political/policy issues, eg energy prices, immigration, Scottish independence, EU membership, the “debacle” over airport development, or the “complete failure to deal with planning”. As one FTSE chairman put it: “It is so difficult to know whether the rhetoric is reality.” (A perennial problem when it comes to politics.)

FT: City on alert for Labour’s political reckoning

Recent bank bonuses seem to have emboldened shadow chancellor, Ed Balls, to tolerate, or is that, promise, a bank bonus tax. Labour is hoping to raise up to £2 billion, which would be used to fund its job guarantee for the young jobless. This may harm Labour’s business credentials, but will it be a vote winner?

FT: Ed Miliband: Europe needs reform but Britain belongs at its heart

In a further attempt this week by Labour to define its political positioning, its leader, Ed Miliband outlined his stance on the EU. He committed Labour to holding an in-out referendum, were there to be a further transfer of powers from the UK to the EU, something which is unlikely in the next Parliament. He conceded that the EU’s reputation is at a low ebb, and that “if Britain’s future in Europe is to be secured, Europe needs to work better for Britain.” To this end, a Labour government would seek tougher EU rules on immigration and foreign benefits claimants.

Guardian: Have Boris, Gove and Osborne written off the 2015 election?

Conservative Home editor, and former Tory MP, Paul Goodman, argues that the outbreak of infighting among senior Tories over the future leadership of the party betrays a lack of confidence in David Cameron’s ability to pull off a majority election win in 2015. By contrast, whatever the views of senior Labour politicians on Ed Miliband’s leadership, they are doing a good job at keeping them private. The more that Conservatives ventilate their problems publicly, the more likely that they will help Ed Miliband win.

 

Daily Telegraph: Budget 2014 announcement: What to expect

George Osborne will deliver the 2014 Budget at 12.30 Wednesday March 19. Here are some of the things to look out for, not that any of this has been pre-briefed, of course…

A cautionary tale from the United States

The Financial Services Bill, which will abolish the Financial Services Authority and enact a new regulatory regime for financial services, is currently being considered at public bill committee stage in the House of Commons. But, as is the way with Bills in committee stage, it has all but disappeared from view.

However, sometimes public bill committee debates can shed some light on the finer points of legislation that escape debate in the more general second reading debates. The United Food and Commercial Workers (UFCW) union of North America has done us all a service by highlighting a loophole in the legislation that gives lighter touch regulation of some new banks (such as those run by supermarkets) compared to the established high street banking operators.

Under the legislation, the remit of the new regulators will automatically extend to bank holding companies but not to non-financial holding companies, eg retailers, that own banking subsidiaries. The Bill does give the Chancellor the power to extend by Order the regulation to new entrants like Tesco. But this begs the question put by shadow Treasury minister, Cathy Jamieson MP, “if a company is or wants to become a bank holding company, why should it not be regulated as such”?

This is a question that exercised US regulators and legislators in 2005 when ASDA owners, Wal-Mart, applied for a banking licence. The UFCW joined a coalition of bankers, the Federal Reserve and regulators in opposition. Even the then Federal Reserve Chairman, Alan Greenspan, called for the closing of the loophole in US law that allowed some commercial firms to open banks, on the grounds that the Federal Reserve would not have the power to oversee the parent company and banking subsidiary on a so-called “consolidated basis”. In the absence of such a power, he argued, commercial firms should not be allowed to enter banking. The Federal Deposit Insurance Corporation – a US supervisory body – imposed an unprecedented moratorium on applications for the type of licence that Wal-Mart sought, and bills were introduced in Congress to outlaw commercial firms from owning banks. Wal-Mart subsequently withdrew its application.

As Jamieson put it to the Financial Secretary to the Treasury, Mark Hoban MP: “Does this not represent a cautionary tale for us here in the UK?”

It begged a number of other questions that she put to Hoban:

  • Why has this exemption to regulation been made?
  • Is light touch regulation being offered in order to attract new entrants?
  • If it is necessary to regulate financial holding companies, why is it not necessary for non-financial ones? Are the risks different?
  • Under what circumstances and what criteria would an Order be made to extend regulation to non-financial groups?
  • If the regulation is not extended until after a problem has arisen, won’t that be too late?
  • What guarantees are there that new entrants with customers’ non-banking data won’t misuse that data or infringe people’s privacy?

In proposing amendments that would have automatically extend the new regulators’ remits to new entrants, Jamieson made it clear that no one is talking about telling supermarkets how to stock their shelves or airlines how to plan their routes. The regulators would only exercise their powers if they considered that a parent company’s actions or omissions could have a material or adverse effect on the regulated subsidiary. Regulators could require the parent to take or refrain from specific actions or compel it to provide information. This didn’t prevent Mark Hoban from joking that we wanted to avoid regulators intervening on the price of bread in Tesco or Sainsbury’s. Beyond that rather obvious joke, the minister didn’t have much by way of response or than to say that the proposed regulation represents a “proportionate power of intervention”.

The amendments were not pressed to a vote as Jamieson was probing Hoban to see if he accepted that there was a problem. His response to the debate (Hansard Financial Services Bill committee 8/3/12 columns 463-467) suggested that he didn’t and she promised to return to it in the future. This is a relatively small part of the Bill, but in terms of clarity, consumer confidence and protecting the taxpayer, every little helps. Now where have we heard that before?

From zero emissions to zero debate

The irony of the 2010 General Election campaign is that it is the most unpredictable for a generation, yet there has been little serious policy debate apart from on the financial crisis and National Insurance. Even the arch spin doctor, Alastair Campbell, is calling for more media coverage of policy.

There has been massive interest in the leaders’ debates, which has blown away all the early predictions of the likely result. It has also nullified the parties’ best efforts to devote discussion to specific policy areas on particular days.

So it should come as no surprise that polling by Ipsos Mori should show that, for the first time since 1987 (when the question was first asked), party leaders are as important as policies in deciding voters’ choice of party. The gap in favour of policies over leaders widened from 1997 to 2005, but narrowed dramatically by summer 2008 and is now level.

I know it’s the economy, stupid, so it is entirely appropriate for the level of public borrowing and the fragile nature of the economic recovery to dominate what little policy discussion there is. But there has been virtually no discussion of other issues such as transport, crime, health or education, education, education.

Does anyone recall being told that tackling climate change was the number one issue facing, not just the country, but the whole world? True, this and the related issue of future energy supplies, came up in last night’s leaders’ debate. But there has otherwise been virtually no mention of the subject.

The Guardian did at least host a debate between Energy Secretary, Ed Miliband and his Conservative and Liberal Democrat shadows, Greg Clark and Simon Hughes. After 36 hours, the paper’s online report had attracted 52 comments. By contrast, just one of its comment articles on last night’s leaders’ debate received 281 comments in half that time.

There is no shortage of policy or initiatives on energy, climate change or reducing carbon emissions. We are told that so-called green industries have the potential to create up to half a million jobs. Yesterday, I attended the 2010 Sustainability Live exhibition in the National Exhibition Centre in Birmingham. This brought together hundreds of exhibitors, from renewable energy equipment manufacturers to sustainable waste disposal and water treatment specialists, university research departments, trade associations and professional bodies.

There is huge commercial and academic interest in developing the means to reduce harmful emissions, and to develop a more sustainable economy based on innovative and more secure energy supplies. Yet none of the exhibitors that I spoke to were aware of any discussion in the election campaign that is relevant to this burgeoning sector.

When it comes to climate change, we seem to have gone from zero emissions to zero debate. There will, eventually, be plenty of discussion on the policies that the new Government should pursue, but not till after the election.

Filling in potholes

In the 2010 Budget, the Chancellor of the Exchequer, Alistair Darling, promised £100 million to fill the nation’s potholes. But in case you think that this is the limit of his ambitions for investing in our economic infrastructure, he also published a strategy for securing as much as £1 trillion of investment in other holes in the fabric of the nation’s economy.

In the little-noticed Strategy for National Infrastructure, the Government outlined how it will attempt to secure the £40-£50 billion annual infrastructure investment needed over the next 20 years. There is a significant risk of a gap emerging in the funding of large infrastructure projects and, as I discussed in an earlier blog, the Government has established Infrastructure UK to address this.

If the £1 trillion is to be found and deployed effectively, it is important that businesses engage with the Government as it fleshes out its strategy.

The Government wants to stimulate investment, primarily from the private sector across five sectors that contribute directly to economic growth; energy, transport, water, waste and communications. This will cover assets such as waste treatment centres, rail, ports, roads, gas storage, recycling facilities, electricity generation and distribution, and telephone, TV and radio networks.

So far, the strategy is all about process rather than substance.

Infrastructure UK will manage the establishment of the proposed Green Investment Bank with public and private funding of £2 billion to invest in the low carbon sector with a particular focus on energy and transport projects. A consultation on this will be published in the summer.

And there’s more. There will also be a National Infrastructure Framework by the end of 2010 with departmental supply chain analyses; a report on the costs of large-scale civil engineering works by the end of 2010; an action plan on public-private interdependencies by 2011; and an Infrastructure Technology Strategy by 2011. Zzzzz…

The people drawing up this strategy clearly haven’t read my colleague Steve’s blog on why we take so much longer than the French to complete large infrastructure projects. And rather worryingly, the strategy document says that the Government will consider whether, not just how, to give longer-term certainty to public spending on infrastructure.

But at least it’s a start. The Government may be long on process but businesses involved in infrastructure provision should nevertheless engage with the policy makers drawing up these strategies and frameworks. Decisions will be made on investment priorities, changes to the regulatory environment and project financing. If nothing else, these initiatives give business the opportunity to put forward their views on what changes should be made across a whole swathe of policy to facilitate this investment.

A change of government won’t make any difference to this imperative as the need for investment in our infrastructure won’t end on 6 May. The holes need filling and that will require pots of money.