– Mark Hannam is a guest columnist, the views expressed are his own. He formerly worked at the Bank of England. He currently chairs Fair Finance, a microfinance company. The views expressed are his own. –

George Osborne’s proposals to reform the UK’s system of financial regulation make for good short-term politics but bad long-term policy. He should think again.

Blaming the tripartite structure of financial regulation for the banking crisis makes sense politically, because it suggests that the Prime Minister, who designed the structure, was responsible for the crisis.
Good politics does not always make for sound policy however. There are three reasons to think that Mr Osborne’s proposals are ill conceived. First, unless the opinions polls change dramatically in the next few months, the FSA will start to haemorrhage high quality staff and will not be able to replace them.

Second, if the Conservatives implement these plans they will throw the financial regulatory system into chaos for two or more years while the re-organization takes place. This will create risks in an already fragile financial system and generate costs for an already depleted public purse. Regulatory reform on this scale is neither quick nor cheap.

Third, if these reforms are fully implemented the UK will find itself with a system of banking supervision run by a management team that in practice knows nothing about banking and nothing about supervision.
When I worked at the Bank of England in the mid-1990s there were two career options for ambitious employees. To be successful at the Bank required a couple of degrees in economics leading to a job in the Research Division, preferably on monetary policy.

For those who preferred not to remain at the Bank, a successful stint in the Markets Division was the route to maximize one’s options, by later departing to the “real world” of the financial markets. This is the path I took.

For the aimless and the loafers there was Banking Supervision. Occasionally a bank would collapse and a junior official would be fired to appease the critics. For the most part it was a pleasant way to earn a decent salary with a pension at sixty.

Since then, banking supervision has been taken over by the FSA, where it has been gradually re-engineered into a serious job. Markets activities have been outsourced to the Debt Management Office or scaled back. The brightest and the best now come to the Bank solely to work on monetary policy, where they report to people who know nothing else.

Of the nine current governors and executive directors only one has any recent experience of real banking. Most joined the Bank straight from studying economics at university and have never worked anywhere else. The exceptions, like the present Governor, joined the Bank after teaching economics at university.

If the Bank had taken an open-minded approach to monetary policy it would have recruited people from the financial markets who knew about the price of money and its effect on other asset prices. It would have spent some time talking with markets participants rather than talking at them. Instead it hires and promotes ingénues.

The idea that the “Threadneedle Street School of Economics” is an appropriate place to embed the teams of people charged with supervising the UK’s major financial institutions is therefore risible.
Young Mr Osborne probably does not remember Joyce Grenfell’s celebrated monologue, in her role as a nursery school teacher. He would do well to heed her advice: “George, don’t do that!”

Biography: Mark Hannam worked at the Bank of England from 1993-96, then at Citibank and Barclays from 1996-2005. He now chairs Fair Finance, a London-based microfinance firm, and is a part-time writer and his articles can be found at www.markhannam.com

- James Graham is the Campaigns and Communications Manager of Unlock Democracy The opinions expressed are his own. -

The rise of the far right in Britain is not a sign that people are flirting with fascism but a signal that disengagement has reached a crisis point.

The BNP’s rise has been slow but relentless over a 20-year period. The big turning point was actually the 2001 general election when Nick Griffin got 16 percent of the vote in the Oldham West constituency following a series of riots around the north of England. In 2003, they became the second largest party in Burnley, a trick they repeated in Barking and Dagenham in 2006 and Stoke on Trent in 2008. The election of Richard Barnbrook to the Greater London Assembly last year made it clear that they were in the running to make gains in the European Elections. If anything, the big surprise is that their gains were as limited as they were.

But there are a number of things to note about this. First of all, their success under Nick Griffin has been rooted in successfully presenting themselves as a non-racist and non-fascist party. Their deep fascist and Nazi links are apparent to anyone who does a bit of research but they have become adept at presenting themselves on the doorstep as something else.

In this respect they have been helped a lot by the relentless pace of 24-hour news. All the evidence suggests that an openly fascist party would continue to get nowhere in the UK. It may not seem much, but we should be consoled at least that the extremists will have to operate by stealth for the foreseeable future if they wish to continue to make progress.

Secondly, the party’s success is rooted in naked opportunism. Wherever there is a political vacuum, the BNP have rushed in. Burnley in 2003 is an excellent example of that, with both the Conservatives and Liberal Democrats failing to field candidates in 6 out of 15 wards. Their campaigns are rooted in their ability to exploit local issues and incorporate a narrative about immigration, victimhood, fear and resentment. Often these are based on the most outrageous lies - Richard Barnbrook for example has recently been caught making up three murders in Barking and Dagenham. But of course, by the time they get found out the damage has already been done.

Thirdly, they have yet to gain a sustainable foothold of power. Burnley, seen by some as a pariah council in 2003, is now controlled by the Liberal Democrats with a rump BNP group in fourth place. The BNP saw both their total votes and share of the vote fall this year compared to the London Assembly election last year, despite a much reduced turnout which should have been helpful to them. Their record in local government is lamentable. It would seem that for whatever reason people are voting for the party, for a substantial number of them once is enough.

Proportional representation has been criticised for helping get the BNP elected to the European Parliament. This is ridiculous: all proportional systems do is better reflect public opinion. A mature democracy must confront extremism, not brush it under the carpet. Furthermore, their rise throughout the past decade has been helped by the iniquities of the first past the post (FPTP) system. In Barking and Dagenham for example, they got more councillors elected than the Conservatives despite receiving fewer votes. There is no question that the uncompetitive nature of FPTP has been useful to them.

It is shocking that the BNP now has two out of the 72 UK MEPs but they will remain marginalised in Brussels. The real scandal however is the very real power they have been seizing for years in local government by exploiting the often-undemocratic nature of the FPTP system. If mainstream politicians have now woken up to the threat of the far-right, this is what they need to be concentrating upon.

– Paul Taylor is a Reuters columnist. The opinions expressed are his own –

“All political careers end in failure,” the late British Conservative Enoch Powell famously said. And perhaps all political cycles end in scandal.

The outcry in Britain over politicians’ expenses that has claimed ministerial scalps and threatens the survival in office of Prime Minister Gordon Brown reflects more than just anger over taxpayer-funded duck houses.

Parliamentarians have become scapegoats for a deeper malaise combining the twilight of the Labour Party’s long reign, the worst economic slump since the Great Depression and the shaming of the City of London’s financial titans.

This is not to belittle abuses of the public purse by individual lawmakers. But they do not fully explain the nervous breakdown that has gripped Britain in the last month.

Seen from abroad, many Britons seem to feel their country has been politically, financially and morally devalued. It is easier to vent frustration at MPs having their moats or tennis courts cleaned at public expense than to accept that Britain has been on a binge for a decade and faces a long, costly hangover.

Bits are falling off Gordon Brown’s fag-end government in the same way that befell John Major’s hapless last Conservative cabinet in the 1990s and James Callaghan’s washed-up minority Labour administration in the 1970s.

Parties that stay long enough in power get lazy, sleazy and accident-prone. Remember the political funding scandals that tainted the sunset years of Francois Mitterrand and Jacques Chirac in France, and of Helmut Kohl in Germany. Or the “back to basics” sex scandals and bonfire of mad cows that did for Major.

What makes the current mood in Britain particularly toxic is the cocktail of political brown-out and economic distress.

In the last 18 months, house prices have tumbled in a country where home-ownership is central to wealth. The pound has lost a quarter of its value against the euro, as Britons discover when they go abroad. Banks have been nationalised or propped up by the state. Unemployment has surged. Government debt has gone through the roof and taxes are rising.

Britons who own homes, shares and/or private pension savings are worth less and face an enormous bill for the clean-up. Many home-buyers who joined the party late have “negative equity” — they owe more in mortgage than their house is now worth. Consumers are groaning under unsustainable debts.

There is also a dawning awareness that after 25 years of deregulation and fast fortunes, Britain is going to have to do something other than financial capitalism to earn an honest living in the coming years.

Financial Times economic commentator Martin Wolf put it starkly when he wrote that the UK had “a strong comparative advantage in the world’s most irresponsible industry” and needed to diversify away from finance. The bill for rescuing banks will be comparable to the fiscal costs of a big war, he said.

Such introspection does not come easily to a proud old nation fond of lecturing foreigners, especially continental Europeans, on how to run their economies.

The French, Germans and Italians can be forgiven a smirk of “schadenfreude” (pleasure at others’ misfortune) after years of being hectored — not least by Gordon Brown — about economic reform, deregulating financial services and labour markets, privatising pensions and modernising the welfare state. But they should not feel too smug, since most are facing an even deeper recession than Britain this year.

Now that politicians have replaced bankers as public hate figures, it is safer for British party leaders to outbid each other with proposals for reforming parliament than to tell the public the ugly truth. Whoever wins the next election, most Britons will earn less, pay more tax, retire later on a smaller pension and enjoy less public spending on schools, hospitals and transport.

The bankers will cost Britons far more than the politicians. It will make the cost of removing dry rot and changing chandeliers in MPs’ second homes look like small change.
(editing by David Evans)