Conservative MP Steve Baker’s website encourages his constituents to “enjoy freedom responsibly”, something he believes is being made more difficult by both the Government and the Bank of England.
Treasury select committee member Baker is highly critical of those in power meddling in the economy and as various politicians seek to sell schemes such as Help to Buy to the electorate, he says such solutions are often behind the problems in the first place.
“It comes down to whether you believe in freedom and free markets, which means people co-operating without being steered by Govern-ment. Or, whether you think people can’t be trusted to co-operate without Government setting the direction and extent of it.”
The power of the elite is Baker’s top concern but close behind is the proposal to allow HM Revenue & Customs to recover owed tax directly from people’s bank accounts. The consultation on this closed this week.
Baker is keen to grill Chancellor George Osborne over the move which the TSC describes as “extremely worrying and excessive”, warning it should not be allowed without some kind of independent oversight.
He says: “My first question will be about the rule of law. Some principles you just don’t compromise. The point is not that whatever is passed by Parliament complies with the rule of law. It is about a higher ideal of what kind of law is acceptable. Laws which infringe on property rights without due process are unacceptable.
He adds: “It is wrong for Conservatives to accept the assumption of state collectivism which lies behind HMRC getting power to act on its own authority.”
A former engineer officer with the Royal Air Force, Baker was elected to the TSC in May to replace Andrea Leadsom, who was promoted to Treasury economic secretary. He is likely to prove a tough examiner for those called to give evidence – especially if they work in central banking.
In June, the BoE’s Financial Policy Committee moved to stop lenders having more than 15 per cent of their mortgages worth more than 4.5 times a borrower’s income.
Asked whether the move came too soon, Baker says it is more a case of whether the FPC should be doing it at all.
He says: “I don’t know whether it is too early or too late and neither do they. There is a kind of Kremlin-ology going on here. We do not live in a free society when we are waiting for committees of wise people in positions of authority and trying to second-guess them.”
But he does not propose putting politicians back in charge of monetary policy. “Anybody who has watched Parliament knows that wouldn’t be a very good idea,” he says.
In his time developing software for financial institutions such as Lehman Brothers and working with financial think-tank The Cobden Centre, Baker has come to radical conclusions about how banking should work.
He advocates a system of free banking, where instead of a central bank monopoly on creating bank notes and reserve accounts, those roles are left to private banks – which already create the majority of money in the system through making loans.
Under a system of free banking, says Baker, banks would be limited in how far they can leverage and be less likely to fall foul of moral hazard created by the Bank’s role as lender of last resort and other state interventions into the sector, such as deposit guarantees.
He says: “All the time we have a banking system where you can lend money into existence, with interest and with all the downsides socialised, you are going to have unjustly widening wealth inequality and an obvious sense of injustice.
“We should be talking about the fundamentals: central banking, fiat money, reserves, deposit guarantees and limited liability.
“We are trying to regulate away the inevitable consequences of leaving in place moral hazard. What I would do is take out the moral hazard.”
Whether it is Basel III “incentivising” mortgage lending through lower risk weightings at the same time as the Bank looks to curb mortgages or the Government trying to encourage people to save at the same time as the Bank keeps rates so low that it discourages saving, Baker says the market would be better if left alone.
He says: “Government intervention in the market was one of the fundamental reasons behind the financial crisis and trying to solve the problems with even more regulation is likely to lead us even further down the rabbit hole.”
Homeownership has long been a cornerstone of Conservative policy but Baker believes Help to Buy is “storing up trouble for the future”.
He says: “There can’t be any doubt it tends to elevate prices and helps people buy houses they otherwise could not afford. That’s surely the purpose of the policy,” he says.
Describing Bank governor Mark Carney as an “exceptionally talented man and an obvious international statesman”, Baker says the Canadian is one of only a few people capable of doing the job – assuming it is actually possible.
“He is making a good fist of a job that may well be impossible: steering all of our lives by fiddling with interest rates and rules around who can lend what to whom.”
Such a paradigm shift as the one Baker proposes is likely to take longer than the year’s tenure he has on the TSC before the general election leads to a membership change. But this will not prevent him trying. He says: “On the committee I am trying to open up the debate and move it forward because, as Mervyn King pointed out, of all the systems for organising banks, the one we have is the worst.”
What is the best piece of advice you’ve received in your career?
Try to let people like you.
What’s keeping you awake at night?
The consequences of monetary policy on society.
What is the most significant impact on financial advice in the past year?
The Budget commitment to greater pension freedom.
If I was put in charge of the FCA for a day I would…
Increase the personal liability of bank directors and staff as I set out in Parliament.
Any advice for new advisers?
Advise others as you would wish to be advised for a great deal rests on it.
May 2014-present: Member, Treasury Select Committee
2010-present: Conservate MP for Wycombe
2009-present: Director, The Cobden Centre
2001-2010: Owner, Ambriel Consulting
2006-2008: Architect, Prime Service and Support Control, Lehman Broters
2002-2007: Chief Technology Officer, Business Application Software Developers Association
2005-2006: Director of Product Development, CoreFiling
2000-2001: Head of Client Services, Decision Soft
1992-1999: Engineer Officer, Royal Air Force