Vickers’s half-time score: not half as badas bankers feared or bashers hoped
‘Not half as bad as it might have been,’ was the reaction of the first banker I spoke to on Monday about the interim report of Sir John Vickers’s Independent Commission on Banking. ‘And forcing Lloyds to sell off a few more branches won’t do a damned thing to promote competition.’ ‘Not half as bad’ for bankers seems to imply not half as good as it might have been for customers. The increased and ring-fenced capital requirements for retail banking mean borrowers could be charged more for loans, and are unlikely to be offered greater choice. On the other hand, a less crisis-prone banking sector should be capable of sustaining more stable relationships, so that small businesses do not find bank managers urging them to borrow more than they can afford in boom times, then cancelling their limits and refusing to take their calls as soon as head office says the boom is over.
In that sense, Vickers was justified in saying that ‘these are not half measures’, even if they are partially developed (the final report comes in September) and go only a small way towards sating banker-bashers’ blood-lust. Cleaving investment banking from retail entirely was never in serious prospect, and the big banks will have little difficulty finding the extra capital for their retail arms. So I doubt whether any will act on their threats to move abroad, especially (as a useful Reuters report pointed out this week) given the huge tax advantages of staying put.
So that leaves the competition issue which the Treasury select committee and I (if I may modestly put it that way) have been banging on about for some time. New Lloyds chief António Horta-Osório says it would be unfair to his shareholders to force them to dispose of the entire Halifax-Bank of Scotland branch network, rather than the slice of it the EU has already ordered him to sell. But since Vickers has now confirmed what the rest of us always thought, that the Lloyds-HBOS merger conceived by Gordon Brown and eagerly taken up by the Lloyds board was in fact a thoroughly bad deal, it’s hard to see why the shareholders should not accept the consequences in the interests of restoring a more balanced high-street market. And while we’re at it, why not carve NatWest and Coutts out of RBS as well?
Hong Kong cash-back
The spirit of Cowperthwaite lives. As financial secretary to Hong Kong’s 1960s administration, Scottish-born Sir John Cowperthwaite put laissez-faire principles into practice to an extent rarely seen elsewhere, fuelling the economic miracle of modern Hong Kong and winning plaudits from the likes of Milton Friedman. Now his post- colonial successor, John Tsang, has reintroduced a note of Cowperthwaitism.
The idea of any government (other than an oil sheikhdom) blessed with such large surpluses and small spending needs that it decides simply to hand back wads of cash to taxpayers seems alien to 21st-century economic life. But that is Tsang’s position. Having forecast a deficit for the fiscal year just ended, he found himself with a £6 billion surplus. Investment in public amenities was evidently not a priority, and no one was pleased by a proposal to inject HK$6,000 (£470) per head into the ‘mandatory provident fund’, which can only be drawn at retirement. Hong Kongers have always focused on the here and now, and their immediate concern is inflation — about the same as ours for consumer prices but a soaring 24 per cent for real estate last year. To placate an increasingly disgruntled citizenry, Tsang is now offering the £470 in ready cash, plus salary-tax rebates.
But he was battling to get his budget through the territory’s legislative council this week, amid demonstrations accusing his Beijing-appointed government of being, in effect, too Cowperthwaitist by half — of letting markets rip while failing to provide sufficient welfare for the poor or investment for the future. Sir John, who died in 2006, must be sitting up there with Friedman thinking how odd it is that their beliefs are now endorsed by Chinese communists.
Tea party
To the Spa at Scarborough, where Harold Wilson made his ‘white heat of technology’ speech in 1963. I’m following him to address a regional WI conference — a hall of Yorkshirewomen so sensible and stout-hearted that I wish they would march south and form a rebel government. The only heat generated today, however, is on the subject of tea and coffee. WIs up here have for many years enjoyed a happy informal relationship — free samples in return for brand loyalty — with one of the county’s most admired family-run businesses, Taylors of Harrogate.
Taylors is a genuinely ethical operator which has won awards in recognition of its fair treatment of the tea and coffee growers in Africa, Asia and Latin America who are its direct suppliers. Its packaging also offers tokens that raise money for rainforest rescue. An ideal partner for the WI, you might think. The trouble is, Taylors’ products do not carry the ‘Fairtrade’ mark which is endorsed by the London-based National Federation of WIs, pillar of political correctness that it has become in recent years.
Taylors point out politely that there are different ways to be ethical and that they pay growers of ‘Yorkshire Tea’ well above Fairtrade minimum prices. Critics point out that the preferred Fairtrade model, a co-operative at the end of a long supply chain, is (as Neil Collins wrote here in 2008) ‘a desperately inefficient way to help the poor’. But to no avail. To meet the National Federation’s terms, Taylors would have had to sign a contract so demanding that they decided it wasn’t worth the effort. The company rep is not even allowed on to the platform to thank the assembly for their past support, lest that should count as free advertising.
It seems to me an absurdly heavy-handed interference in a fine example of capitalism and community in harmony, all the way from the tea-pickers of Rwanda to the tea-pourers of Scarborough. The Yorkshire ladies think so too. Perhaps they should rebel against their own leaders.
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