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Why we must maintain the highest standards in banking in the new political landscape

Like most people who grew up north of the M25, my cultural expectations of those money-making for banks in the square mile were set hard by the tone of the 1980s: wealth, decadence, and all the gentle subtlety of a chalk-stripe, double-breasted suit, with bright red tie and braces.  The culture of the City has, for many Brits, felt very far away.  It has felt like a different country, where different rules, different standards apply.

And yet, this is a view you come to if you consider only recent history.  Given where Britain’s industrial history began, the making of British financial services is as much a story of economic change in Liverpool, Manchester, Edinburgh and Glasgow as it is London. Factory owners and shipping lines needed bankers, and the centres of our northern cities bear witness to this past as the old bank buildings host the new trendy bars and restaurants. What’s more.  Financial services is not – even now - purely a business crucial to London or South East England.  Two thirds of the industry exists outside of London and the South East.  Credit card providers, insurers, pension funds. Companies doing this work provide employment for British people from all over. 

The industry is like a huge octopus.  Its tentacles reach everywhere, as its role in providing capital and credit to businesses and consumers determines the speed and volume of money moving round our country. From the credit lines that help people buy British made cars through to local government pension funds shaping town centre development, well functioning money matters to functions that are not obviously purely financial.

We found this out to our cost, as poor practices in the industry, and a get-rich-quick culture, lead to the death spiral of the 2008 banking crash.  This was a deep crisis, to which politics and the state was forced to respond before it led to total collapse.

Ironically, the Brexit vote has brought about something of the reverse situation.  A political crisis that has collapsed the value of sterling - and which could have done worse in the short-term - has been stemmed by the financial markets  successfully managing risk. We don’t yet know the longer term impact of Brexit, but we do know that business has valiantly kept the show on the road despite serious political upset.

What is the lesson here then?

Firstly, we should cease to think of financial services as impacting one part of the country or one part of our industry. The name The City is deeply unhelpful. Financial services is important to pretty much all our cities.  But that’s why we need a completely different policy debate that restores the role of regional financial institutions like building societies, and hopefully creates new ones to back regional businesses.

Diversity is good, but too often Westminster has responded to the needs of big banks close by, rather than to the diverse needs of our regional economies.

Secondly, given the pervasive nature of financial services, it is absolutely vital that despite the Brexit turbulence, we maintain clear unambiguous standards in our financial services industry. Now the UK has lived through the consequence of poor standards, not just in 2008, but before then. It is easy to overlook mis-selling scandals like endowment morgages or the failure of pension funds.

What is the consistent lesson from all of these scandals? Regulation is important. Powerful regulators can do a lot of good to maintain good practices, and substantially further consumer interests.

But by itself regulation can never deal with the worst offenders determined to shaft the public, and regulation will normally risk becoming over-bureaucratic and ineffective unless we maintain a culture of high standards in our financial services institutions.

What do I mean by culture? Essentially the values that a business lives by.  Is a company’s purpose to squeeze every penny out of their customers? Or to charge them a fair price for managing their money? Do businesses want to create new financial products just to undercut the next firm, or because it will genuinely help more companies succeed, or more Brits do well?

Companies have to answer these questions truthfully for themselves, but meanwhile, policy makers must prioritise maintaining stable standards despite the current political mess we are in.  The public will not thank us for even more uncertainty and opening them up to even greater risk.

Barclays has commissioned a report ‘‘What have the Capital Markets ever done for us? And how could they do it better?’ by New Financial with the hope to start a debate about the value of capital markets to the economy, especially in the UK. Many thanks go to those who joined us at our events with New Statesman so to examine the report’s findings in detail.

Alison McGovern is Labour MP for Wirral South and the co-chair of the all-party parliamentary group Friends of Syria. 

Photo: Getty
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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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