I guess we were all shocked but not totally surprised by revelations about bankers this week. Over the last few years the cornerstones of a functioning liberal democracy – a trusted legislature, independent press and free markets, have all been shaken to their foundations, rocked by scandal.
The minority of MPs who fiddled their expenses have, in the main, been drummed out of Parliament by their parties or the voters. Some have seen the inside of one of Her Majesty’s less agreeable institutions. The expenses system has been made independent and has tough rules. The Speaker has made an enormous difference to the ability of backbench and opposition MPs to question ministers. But it will be a while yet before the public respect or at least stop holding Parliament in contempt.
Press barons and their minions have been summoned before the Leveson Enquiry. Owners, editors, commentators and reporters have had their motives and morals questioned in public. Most of them must have hated it. And we must hope that Justice Leveson makes recommendations that will clean up our media, while preserving free speech.
But what of the banking industry? We poured £66billion into acquiring shares in RBS and Lloyds, which someday I would like to see transferred to every citizen. The whole banking sector was saved by billions more in loans and guarantees. Yet while the banks were in danger of heading over a cliff it is now revealed that the main priority of some of t heir employees was to fix the loan interest market, to land themselves a fat bonus. Some gratitude.
I was in Canary Wharf one evening last week for a London gay pride event. The view from the 30th floor of a City law firm was striking. Separate towers for all the main banks and the consulting firms who work along side them on the millions of transactions and deals. At ground level this financial village, derelict docks 30 years ago, was buzzing with activity as people enjoyed the night time economy. It is easy to be in awe of what you see, London as the world’s leading financial centre. It was if the near collapse four years ago had never happened.
And that’s the problem. For many people there has been no closure on the financial crisis. The “credit crunch” is still being felt by many small and medium businesses. The economy, which shrank by 7% in 2007 – 2009, has still not recovered to pre crash levels. Yet inside those gleaming towers in the City and Canary Wharf there are thousands of people still on enormous salaries and believing themselves entitled to huge bonuses. They have been cocooned from the rest of UK plc, insulated from the tough world of the real economy and the wrath of public opinion.
So what can be done? The government, the bankers themselves and we the public can all take action.
First, the Coalition Government’s central and unifying purpose is to balance the nation’s books, get the economy growing and reform the banks. Progress is being made on all three fronts but Cameron, Clegg, Osborne and Cable need to drive the Coalition forward with radical reform. The Financial Services Bill is already in Parliament, toughening up the lax regulation left to us by Brown, Balls and Miliband. The government must also press ahead with shaking up the banks, ring fencing customers from the “casino” activities that have been laid bare this week. We also need some real competition. The banks are unlikely to change when they exist in an oligopoly of world wide brands. We need to make it easier for new banks to enter the market. They could be local community banks, just like the building societies that were de-mutualised and then swallowed up by the banks 20 years ago. There could be new banks specialising in small businesses and social enterprises. There is surely room for more ethical banks, such as Triodos based in Bristol.
And the bankers? Well it’s time the banks cleaned up their own profession. The City is full of intelligent, bright people who can only work in this lucrative sector after passing professional exams. Bankers may behave stupidly, but they are not stupid. But when did you last hear of someone being chucked out of the Institute of Bankers? All the other professional institutes, accountants, tax consultants, lawyers and corporate treasurers should be throwing the professional ethics book at some of their members. There must surely be a clear out in the board rooms as many of the directors must have breached their fiduciary duties to act in the interests of the shareholders. How on earth is Bob Diamond still at the helm of Barclays?
And us? Well we can do more than shrug our shoulders or have a rant down the pub. We are all customers and our combined financial fire-power is enormous. The stats show that we are more likely to go through a couple of divorces than move away from our bank. But moving our money would make them sit up. So why not open an account with an ethical bank? I have opened an ISA with Triodos. Once the government’s reforms go through it should be much easier to move whole accounts, preferably to new providers. The current big banks will have to change and work hard to earn our trust and our custom.
Finally, the government must break the spell that seems to have trapped previous administrations. The City is indeed a major contributor to the UK economy. I want our financial services industry, crucial in Bristol and many other cities, to prosper and be world leading. But this cannot be at any cost. Vince Cable has rightly referred to the “cesspit” of some City dealing rooms. His Labour predecessor said that new Labour was “intensely relaxed about people getting filthy rich”.
The government must now initiate a short sharp enquiry into City business practices, to make sure our regulations can root out operations that distort the market. But we also need a wider ranging review of business ethics. As things currently stand it seems many city traders lack any understanding of ethics or personal morality. I would like to see the authors of those toe curling emails hauled before an enquiry (if the courts don’t get them) to explain to the rest of us why they think they can behave in such a venal way, with lack of regard for the rest of society.