It's not Oleg the Oligarch - it's the economy stupid!
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Here, humbly submitted, is my list of what I think is important, in a series of questions and a few observations for Her Majesty’s Government and Her Majesty’s Opposition to maybe get their teeth into in the next few months.
1) How much borrowing and spending can the UK sustain? We are financing a massive programme of nationalisation, bailouts and potential bailouts and the Bank of England’s prognosis for bank profits in the next five years is grim. This coincides with the private finance initiative coming back on to Government books, an abandonment of Gordon Brown's already remarkably bendy fiscal rules and the possibility that the Chancellor may try and spend his way out of a recession or at least make it shallower. Before the crunch, the Tories were all for matching the Government's spending plans. They now say Gordon’s borrowing is making up for past mistakes. I have yet to see them say stop borrowing so much. What do they think now?
2) What happens to high street banking post bailout? We need to know what both parties plan for managing this temporary period of bank public ownership, whether it is at arms length or not. Is it simply a case of backing the banks until then can stand on their own two feet again or do we want a permanent change in behaviour? Tell us please.
3) How much credit should the public get? By credit, I mean the kind the public are used to getting handed on a plate. Is it all to be regulated, and what does that mean? Store cards, second loans, buy-to-let, mortgages in general. I assume neither side wants a return to pre-boom practices in the mortgage industry. Clearly capital criteria will be adjusted probably to take account of boom times and rise accordingly but what about lending criteria as enforced through the FSA? This isn't simply a regulatory matter but an economic one. Perhaps it is a balancing act but which party has the best credentials for walking this particular tightrope.
4) What do you think happened? No-one suggests this is easily explained. We are still arguing about 1929 after all. But in trying to understand what happened, perhaps we can come up with a UK position in terms of regulating certain types of instruments sold amongst investment banks, the role of rating agencies, whether or not we regulate hedge funds and whether or not we restrict shorting. In all this, loose money and loose regulation obviously played a part. Some of this will involve both parties accusing each other of being soft on the City. Fine. That is politics. Brown has received a little bit of a bailout bounce, probably deservedly, but he didn't end boom and bust. Damn him if you must. But would the Tories in power have done anymore to restrain things? Everyone needs to make their case. What do you think happened and why?
5) What is your plan for saving the City? This may seem a little hysterical but in relation to point four, someone needs to make the case for London as a financial centre, how regulation can work to bring stability, and how it is not some sort of bucket shop for every financial instrument under the sun. The City and Canary Wharf may only be guilty of some low level aiding and abetting as were many other financial companies in other global centres. Continental European politicians are probably wrong in their assertion that London is a Trojan horse for this mess infecting Europe. But everyone is looking for someone to blame. In addition I don't think the US is going to sit there while London gets to play some sort of regulatory arbitrage as it has been accused of doing over Sarbanes Oxley. So what at least broadly is the thrust of the UK's case for the City?
6) Do you believe in actively encouraging saving? We hear Asia, while certainly not decoupled, may weather the storm better because of their savings levels. What about here? Should Government be better at promoting saving in equities for the long term and what are the plans to get there? Actually the Conservatives have kept up a constant fight on this and the Government’s record is poor. But on personal accounts they have parked their opposition while we await a Government report. Boo.
7) How do we resist protectionism? This is universally regarded as a bad thing. That argument has been had and lost in the UK, I think. But what is our case for an open, free and fair trading world particularly if Obama wins and is tempted to concede some ground to the protectionists in his party?
8) Are we going to build some more houses? If we don’t, arguably we risk the system distorting again as more people find extraordinary ways to stretch themselves to get on the housing ladder although it's been more like housing snakes and ladders recently. Eventually, when something like normality returns, the market may well start to provide this type of loan again, or will politicians stop the banks lending? See point two.
9) How can we keep the recession short and the recovery long and sustainable? How can we take the doom out of the bust? At least it is getting cheaper to export almost by the hour but that is clearly not without its downside. We have heard some good stuff from David Cameron on small business. More please from both sides.
10) How much tax should we pay and how should tax be distributed across income, profits, and goods and services? All right. I know this is a biggie. But I’ve got one suggestion for a start. Leave pensions alone.
There. That’s enough to be getting on with.
As for silly business that has vexed political commentators for the last couple of weeks, I’m afraid I wouldn’t care if George Osborne was caught in Corfu guzzling caviar with Cruella De Vil plotting to make another puppy-dog fur coat. I wouldn’t care if Peter Mandelson was seen quaffing Champagne with the Milk Tray man making a dastardly plan to make all the chocolates in chocalate boxes coffee cremes this Christmas. It might be imprudent, it might be unpleasant and yes it shows flaws in the judgment of both men. One at least seems suitably chastened. The other, well he has form, though we knew that already. But it’s not illegal.
As I say, the issue is the economy stupid, not that stupid yacht.
Instead the pair of them should be contributing to a proper political debate and answering questions like how did we get into this mess, how can we all get out of it and how can we make sure it doesn’t happen again.
