Lib Dem, Tory and Labour all in this together on financial regulation

Following Ed Balls’ appointment as shadow chancellor, the two coalition parties have been quick to point to regulatory failures made by the Labour government in office. But the consensus on light touch regulation came from all three parties.

Labour-Lib-Dem-Tory The Financial Times quotes Michael Fallon, Tory deputy chairman and their attack dog on economic matters:

“Ed Miliband and Douglas Alexander can complain all they like about Labour’s terrible record on banks, but Ed Balls, the man responsible for 13 years of regulatory failure, is now back in charge of their economic policy.”

Yet in June 2006, George Osborne wrote in the Telegraph:

“Many of the regulations that affect the City, such as the Markets in Financial Instruments Directive, originate with the European Commission.

“I fear that much of this regulation has been burdensome, complex and makes cross-border market penetration more difficult. This is exactly the wrong direction in which Europe should be heading and it threatens the global competitiveness of the City of London.”

Indeed, as late as August 2007 – when credit market were starting to freeze – the Sunday Telegraph revealed that the Tories had “a radical programme of cuts in red tape and regulation aimed at saving British businesses £14 billion a year”.

The Lib Dems like to claim that Vince Cable saw the crash coming giving Nick Clegg more license to make claims such as:

“If you ask yourself who was in charge of the City when they were gorging themselves on bonuses and lending irresponsibly … who was whispering into Gordon Brown’s ear budget after budget, creating this huge fiscal deficit – the answer to all of those questions is Ed Balls.”

But as Channel 4 Fact Check has documented, Vince Cable had been a supporter of Gordon Brown’s light touch economic policy. Speaking in the House of Commons in support of the Labour government’s Financial Services and Markets Bill which established the Financial Services Authority:

“I want to express broad support for the bill, whose philosophy and whose architecture of financial regulation reflect a broad consensus.”

According to the New Statesman, Cable said ”No one is arguing for an increasingly severe, more onerous and dirigiste system of regulation.” Any regulation, he said, should be “done on a light-touch basis”.

On the regulation of the City before the financial crash, politicians of all parties certainly were all in this together.

http://twitter.com/andyprg/status/29466262048342016 Andrew Griffiths

RT @leftfootfwd: Lib Dem, Tory and Labour all in this together on financial regulation: http://bit.ly/ijby8z writes @wdjstraw
http://twitter.com/dontmindwaiting/status/29466869702328321 jennifer roberts

RT @leftfootfwd: Lib Dem, Tory and Labour all in this together on financial regulation: http://bit.ly/ijby8z writes @wdjstraw
http://twitter.com/anubeon/status/29467304785879040 Lee Hyde

RT @leftfootfwd: Lib Dem, Tory and Labour all in this together on financial regulation: http://bit.ly/ijby8z writes @wdjstraw
http://twitter.com/salardeen/status/29467452962250752 salardeen

RT @leftfootfwd: Lib Dem, Tory and Labour all in this together on financial regulation: http://bit.ly/ijby8z writes @wdjstraw
http://twitter.com/americanliberal/status/29468819713957888 American Liberal

.@WdjStraw pens an excellent piece in @LeftFootFwd that helps to explain the UK's political crisis of confidence. http://bit.ly/hOwj78 #P2
http://eoin-clarke.blogspot.com/ Éoin Clarke

Good article Will,

On 4 Apr. 2006, The Independant also carried comments by George Osborne complaining of “over regulation” he accused the government of “furring the arteries”. I am sure there are countless of examples of this kind of talk.

Labour should be honest with the UK voters and admit that in order to get elected, they were forced between 1979-97 to buy into the post-Thatcherite consensus in accepting the Free-Market economy, and that a) it backfired on the voter b) it was never really in Labour’s DNA in the first place…

It seems a bitter twist of fate to be reduced to swallowing Thatcherite monetarism only for it to come back and bite you in the nether regions.
http://twitter.com/johnrentoul/status/29470117309972481 John Rentoul

RT @leftfootfwd: Cable, Osborne and Balls "all in this together" on bank regulation http://bit.ly/gVhQSy
http://twitter.com/mrmattlacey/status/29471048315445249 Matt Lacey

Libs, Labs and Tories 'all in this together' in kowtowing to bankers on regulation: http://bit.ly/gVhQSy
http://twitter.com/rhiannon__rose/status/29471823452176384 Rhiannon Lowton

RT @JohnRentoul: RT @leftfootfwd: Cable, Osborne and Balls "all in this together" on bank regulation http://bit.ly/gVhQSy
Mike Thomas

NO! They absolutely were not ‘together’. The blame for the faulty regulation lies squarely with Gordon Brown and Ed Balls.

These are the exact words of the Shadow Chancellor on the 11th November 1997 during the debate on the Bank of England Act.

The Bill will hive off debt management to a new quango under the Treasury. We know that funding policy is an intrinsic part of monetary policy, and the Bill will leave the Bank as a one-club golfer without even a putter left in the bag. How will the Treasury, the Bank and the new board co-operate to handle monetary policy? If they need to get together, why is it necessary to separate them in the first place?

With the removal of banking control to the Financial Services Authority—the “super-SIB”—it is difficult to see how and whether the Bank remains, as it surely must, responsible for ensuring the liquidity of the banking system and preventing systemic collapse.

What happens if the needs of the banking system conflict with those of the inflationary target? That has happened in the past in the United States, and it could conceivably be happening in Japan. I understand that there is a suggestion that a committee is to be established to work between the Bank, the FSA and the Treasury to try to cope with that sort of problem. If that is necessary, why is it necessary to hive off powers in the first place?

That brings me to the creation of the FSA as a super-SIB. The Bill is only part of the process, but it will on implementation directly conflict with pre-election statements. More importantly, concerns expressed by the Chief Secretary when in opposition may, although he has disowned them today, prove well founded.

The coverage of the FSA will be huge: its objectives will be many, and potentially in conflict with one another. The range of its activities will be so diverse that no one person in it will understand them all. Its structure will be as complex as those of the organisations that it replaces, if not more so. Practitioner involvement is likely to diminish, and costs are likely to escalate as salaries are equalised upwards.

We have no objection to the objective of trying to bring greater simplicity and one-stop shopping to the business of financial regulation, but we fear that the Government may, almost casually, have bitten off more than they can chew. The process of setting up the FSA may cause regulators to take their eye off the ball, while spivs and crooks have a field day. We shall observe closely what is going on in the development of the proposed legislation.

Labour bungled the regulation, they were clearly warned by a host of MPs and the Shadow Cabinet at the time.

Advice they arrogantly chose to ignore.
http://twitter.com/hens4freedom/status/29481591721959424 Hens4Freedom

RT @leftfootfwd: Lib Dem, Tory and Labour all in this together on financial regulation: http://bit.ly/ijby8z writes @wdjstraw
http://twitter.com/wightinternet/status/29483389086076928 Roger B

Lib Dem, Tory and Labour all in this together on financial regulation | Left Foot Forward: http://t.co/Qc802BG
Anon E Mouse

Will – Ed Miliband has no pool of talent to draw from otherwise he wouldn’t have promoted Ed Balls. Initially he didn’t.

When Labour turn round and take responsibility for the deficit they were responsible for instead of blaming someone else, then they may be taken seriously.

Ed Balls may be a better chancellor than Johnson but in the popularity stakes, which is how people vote in Britain, he is well behind.

Already this article shows that by trying to indicate “We are all in this together” you clearly accept both things were screwed up (obviously – look at the debt) and that Balls is to blame. You are excusing him Will.

The public won’t excuse him but if this article is a step towards acknowledging and eventually apologising for what Labour did on the economy then I welcome it…
http://twitter.com/investingtrack/status/29499899913445376 Robert P Reibold

Lib Dem, Tory and Labour all in this together on financial regulation: But the consensus on light touch regulati… http://bit.ly/eNi5Jt
http://twitter.com/emilymarydavis/status/29518434215665666 Emily Davis

RT @leftfootfwd: Lib Dem, Tory and Labour all in this together on financial regulation: http://bit.ly/ijby8z writes @wdjstraw
Rezdoggy

@ Anon: How the hell can Labour be solely blamed for the deregulation of the banks when it was Thatcher that started the deregulation in 1986?
http://twitter.com/ecraig407/status/29532320956416000 Emma Craig

RT @MrMattLacey: Libs, Labs and Tories 'all in this together' in kowtowing to bankers on regulation: http://bit.ly/gVhQSy
Anon E Mouse

Rezdoggy – They had 13 years and did nothing except continue what had already been started. They also didn’t do the deregulation properly and convinced the public that they had ended the normal economic cycle of “Boom and Bust” even though they clearly hadn’t.

To hide the fact they were bodging the economy, the silly “Five Golden Rules” kept being fudged with “Economic Cycle” this and that.

Leave aside selling of our gold at a historic low, Gordon Brown borrowed at the height of the UK tax take in 06/07 which was crazy.

They also continued with the Tory PFI schemes. Also flawed – look at the price of the things.

I congratulate them for not repealing trade union laws but until Labour put hand on heart and admit they blew it on the economy and apologise they won’t be credible.

Because we know they blew it (their own treasury minister confirmed it) and they know we know…
http://twitter.com/rockythehamster/status/29545002166132736 Rocky Hamster

RT @leftfootfwd: Lib Dem, Tory and Labour all in this together on financial regulation http://bit.ly/gVhQSy
http://twitter.com/movetotheleft/status/29548539893776385 movetotheleft

RT @leftfootfwd: Lib Dem, Tory and Labour all in this together on financial regulation: http://bit.ly/ijby8z writes @wdjstraw
william

When will the new Labour inner cabal inhabit the real world?The financial catastrophe took place,2 MAJOR Scottish banks imploded,on our watch.Now we have the walking away of major donors ,in a very public manner,because of the closer alignment to the unions and all the left wing nonsense that TB got rid of.Pretending that other political parties went along with the disastrous policies of banking non control, initiated by GB and Balls,will not wash with the electorate in 2014 or whenever.The party’s leadership are behaving like Liverpool FC.Big crowd(29 percent of voters), used to win lots of things,must be our turn soon.
http://www.leftfootforward.org Will Straw

A few points by way of response:

1. No-one is pretending that Labour wasn’t too blame for lax financial regulation. Ed Miliband has admitted so as has Ed Balls: http://www.newstatesman.com/uk-politics/2010/07/balls-interview-labour

2. The point is that the Lib Dems supported the Financial Services and Markets Act and the Tories railed at Labour for years about imposing too much regulation. Who does the regulating (although important) is less critical than what is being regulated and on this everyone had their head in the sand. Cable was quicker than the rest to spot the housing bubble and problems with box ticking by City regulators but didn’t oppose the initial deregulation.

3. There is no evidence to support the argument that the 10% deficit was Labour’s fault. It would have been better if there had been a current budget surplus in the mid-2000s but the (very) modest deficit at that stage did not cause the huge rise later. For more see this report: http://www.ippr.org.uk/publicationsandreports/publication.asp?id=799
http://twitter.com/tweetminster/status/29565216966582272 Tweetminster

"Lib Dem, Tory and Labour all in this together on financial regulation" http://bit.ly/ggtI3T – Left Foot Forward
http://twitter.com/madkentdragon/status/29565380347297792 Pat Cox

RT @tweetminster: "Lib Dem, Tory and Labour all in this together on financial regulation" http://bit.ly/ggtI3T – Left Foot Forward
Anon E Mouse

Will – All your points may be valid but it happened on Labour’s watch I’m afraid.

Read your link to Ed Balls – fair enough…
Mike Thomas

Is this blog evidence-based or opinion-based?

There is plenty of evidence to show that despite the best attempts of either a Labour death-grip on the Tories or a exculpation by misleading statistics that Brown, Darling, Cooper and Balls must take the lion share of blame for the mess we are in.

No-one was discussing the deficit or reducing business red tape – this was a discussion on financial regulation which Labour got wrong to start with, never corrected it, adapted it or improved it until it seriously failed the economy.

The IMF and OECD were warning Brown on his deficit and asset bubbles as early as 2005 – Brown turned a deaf ear to the warnings and carried on.
http://www.leftfootforward.org Will Straw

Mike, Anon – The point of this article is not to defend Labour. The point is to show that the Tories, in particular, and Lib Dems to some extent don’t have a leg to stand on in terms of their criticism.
matthew fox

Considering Osborne was looking West in 2006, praising Ireland for de-regulating and accusing Gordon Brown as being an impediment to reform, all this nonsense coming from the Conservative movement is political point-scoring.
william

Will Straw,to be reelected , at some future date ,Labour, our party, has to be honest about the dire mistakes it made,whatever the then opposition were saying,because the electorate will never forget the Brown /Balls bullshit of no more boom and bust.
Nionios

The real test for the Tories and the Lib Dems is what they do now that they are in power, not what they were saying when New Labour had a crashing majority in the House of Commons and people like Blair, Brown and Balls were simply refusing to hear any proposals (e.g. from continental European sister parties) about the regulation of the banks. New Labour’s (i.e. Balls’ too) mistake is even more significant given the fundamental importance of the financial services industry for the economy of this country. While we are discussing policy issues, is Balls happy about the fact that the formula used by the Bank of England (given to it by the New Labour government) excludes housing costs? Did this not contribute to the housing bubble and why does it take a Tory Chancellor to raise the issue (as Osborne did, to his credit) and start taking steps to correct this error?

Appointing Balls to the job of the shadow chancellor is like asking the wolf to look after the sheep and can be taken to imply that as long as the coalition is getting less and less popular people will simply have to vote Labour irrespective of who is on the front bench. I fear Ed Miliband will find out that this is an erroneous assumption.
http://twitter.com/studentsw_katie/status/121593483906654208 Katie

Cam, be4 U have a go at Labour's casino capitalism, remember that U wanted to go further on deregulation: http://t.co/RAHmrnKC #cpc11 #con11
http://twitter.com/medwaylabour/status/121593549333602306 Medway Labour

Cam, be4 U have a go at Labour's casino capitalism, remember that U wanted to go further on deregulation: http://t.co/RAHmrnKC #cpc11 #con11
http://twitter.com/silverbullit730/status/121593780141957120 Jamal Barry

Cam, be4 U have a go at Labour's casino capitalism, remember that U wanted to go further on deregulation: http://t.co/RAHmrnKC #cpc11 #con11
http://twitter.com/betheastwood/status/121593861536620547 Elizabeth Eastwood

Cam, be4 U have a go at Labour's casino capitalism, remember that U wanted to go further on deregulation: http://t.co/RAHmrnKC #cpc11 #con11
http://twitter.com/adpucci/status/121594868261847042 Pucci D

Cam, be4 U have a go at Labour's casino capitalism, remember that U wanted to go further on deregulation: http://t.co/RAHmrnKC #cpc11 #con11
http://www.leftfootforward.org/2011/10/camerons-speech-churns-out-the-old-tory-myths/ Cameron’s speech churns out the old Tory myths | Left Foot Forward

[...] Except before the crisis, the Conservative leader promised to match Labour on spending, and George Osborne pushed the government to go further on deregulation. As Will Straw wrote on this blog: [...]
http://twitter.com/yorkierosie/status/159968150643941376 #pressreform

Cameron repeats humbug on rebalancing towards manufacturing, when manufacturing %of econ going down everywhere #Cameron http://t.co/9IJX0y1Z
http://twitter.com/matthewhoulihan/status/159968205614493696 Matthew Houlihan

Cam complains that Labour made a 'Faustian pact with the City', but Tories wanted more deregulation, not less #Cameron http://t.co/9IJX0y1Z
http://twitter.com/patrickjmcguire/status/159968326330753025 Patrick McGuire

Cam complains that Labour made a 'Faustian pact with the City', but Tories wanted more deregulation, not less #Cameron http://t.co/9IJX0y1Z
http://twitter.com/allanmadeley/status/159968764979458048 ALLAN MADELEY

Cam complains that Labour made a 'Faustian pact with the City', but Tories wanted more deregulation, not less #Cameron http://t.co/9IJX0y1Z
http://twitter.com/michael_robins/status/159969305662984192 Michael J. Robins

This is the same Conservative party that wanted further deregulation of the city during the boom years: http://t.co/rIWXdHNA
http://twitter.com/genevieveflight/status/159973242176684032 Genevieve Flight

Cameron repeats humbug on rebalancing towards manufacturing, when manufacturing %of econ going down everywhere #Cameron http://t.co/9IJX0y1Z
http://twitter.com/labour52rose/status/159974537482600448 Alex Braithwaite

Cam complains that Labour made a 'Faustian pact with the City', but Tories wanted more deregulation, not less #Cameron http://t.co/9IJX0y1Z
http://twitter.com/nhsspy/status/159986005397618688 Watching You

Cameron repeats humbug on rebalancing towards manufacturing, when manufacturing %of econ going down everywhere #Cameron http://t.co/9IJX0y1Z
http://twitter.com/jintyg51/status/159987237738655745 Janet Graham

Cam complains that Labour made a 'Faustian pact with the City', but Tories wanted more deregulation, not less #Cameron http://t.co/9IJX0y1Z