Where's all that bank contagion gone?

How far we have travelled.

It is a very telling measure of how far we have travelled down the path to probable Eurozone survival that contagion, and 'bank' contagion specifically, has become much less of a problem. Despite last month’s chaotic, and briefly almost disastrous, Cypriot bank bail-in, and the horribly inconclusive Italian elections in February, there have been virtually no negative consequences for the fortunes of the wider European financial community. A year or so ago either of these events could have been reasonably expected to have raised real fears that queues would form outside banks all over Europe.
An illustration of this is that the Euro Stoxx Banks index is now trading at around 100, the same level as last October, and way above last year’s low of 73.06, seen in July.

The most important reason for this new-found sanguinity is the European Central Bank’s, (ECB), Damascene conversion under Draghi from Trichet’s Bundesbank poodle to a central bank which is focused on the needs of all seventeen states in the union, the completion of which was epitomised by Draghi’s Clint Eastwood moment last September when he warned the markets that, 'we'll do whatever it takes, and it will be enough' and announced Outright Monetary Transactions. This virtually guaranteed that Eurozone nations would always have access to liquidity, hence breaking the potentially lethal ‘dance of death’ of over-indebted states and their under-capitalised banks, who are in turn laden down with massive investments in their national governments’ bonds.

Of almost equal significance has been Chancellor Merkel's extraordinarily dexterous performance in persuading her people of the manifold benefits of the Euro, (i.e. it's a highly effective export finance scheme for Germany-who are the ultimate, unchallenged Currency War victors), and therefore that bailing-out profligate southern neighbours is absolutely in Germany's interest. I’m happy to predict that this will continue, and indeed go into hyper-drive after she has won September's elections, (hardly in question in the absence of any credible Euro-sceptic opposition), as she will then feel free of the political imperatives that have thus far prevented her from allowing Germany to acquiesce to the issuance of jointly and severally liable Eurobonds, (with all Eurozone nations, including Germany, equally on the hook), and a proper banking union.

These measures will ultimately save the Euro, for another 5 years, say.

Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

Photo: Getty Images
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The future of policing is still at risk even after George Osborne's U-Turn

The police have avoided the worst, but crime is changing and they cannot stand still. 

We will have to wait for the unofficial briefings and the ministerial memoirs to understand what role the tragic events in Paris had on the Chancellor’s decision to sustain the police budget in cash terms and increase it overall by the end of the parliament.  Higher projected tax revenues gave the Chancellor a surprising degree of fiscal flexibility, but the atrocities in Paris certainly pushed questions of policing and security to the top of the political agenda. For a police service expecting anything from a 20 to a 30 per cent cut in funding, fears reinforced by the apparent hard line the Chancellor took over the weekend, this reprieve is an almighty relief.  

So, what was announced?  The overall police budget will be protected in real terms (£900 million more in cash terms) up to 2019/20 with the following important caveats.  First, central government grant to forces will be reduced in cash terms by 2019/20, but forces will be able to bid into a new transformation fund designed to finance moves such as greater collaboration between forces.  In other words there is a cash frozen budget (given important assumptions about council tax) eaten away by inflation and therefore requiring further efficiencies and service redesign.

Second, the flat cash budget for forces assumes increases in the police element of the council tax. Here, there is an interesting new flexibility for Police and Crime Commissioners.  One interpretation is that instead of precept increases being capped at 2%, they will be capped at £12 million, although we need further detail to be certain.  This may mean that forces which currently raise relatively small cash amounts from their precept will be able to raise considerably more if Police and Crime Commissioners have the courage to put up taxes.  

With those caveats, however, this is clearly a much better deal for policing than most commentators (myself included) predicted.  There will be less pressure to reduce officer numbers. Neighbourhood policing, previously under real threat, is likely to remain an important component of the policing model in England and Wales.  This is good news.

However, the police service should not use this financial reprieve as an excuse to duck important reforms.  The reforms that the police have already planned should continue, with any savings reinvested in an improved and more effective service.

It would be a retrograde step for candidates in the 2016 PCC elections to start pledging (as I am certain many will) to ‘protect officer numbers’.  We still need to rebalance the police workforce.   We need more staff with the kind of digital skills required to tackle cybercrime.  We need more crime analysts to help deploy police resources more effectively.  Blanket commitments to maintain officer numbers will get in the way of important reforms.

The argument for inter-force collaboration and, indeed, force mergers does not go away. The new top sliced transformation fund is designed in part to facilitate collaboration, but the fact remains that a 43 force structure no longer makes sense in operational or financial terms.

The police still have to adapt to a changing world. Falling levels of traditional crime and the explosion in online crime, particularly fraud and hacking, means we need an entirely different kind of police service.  Many of the pressures the police experience from non-crime demand will not go away. Big cuts to local government funding and the wider criminal justice system mean we need to reorganise the public service frontline to deal with problems such as high reoffending rates, child safeguarding and rising levels of mental illness.

Before yesterday I thought policing faced an existential moment and I stand by that. While the service has now secured significant financial breathing space, it still needs to adapt to an increasingly complex world. 

Rick Muir is director of the Police Foundation