Sunday, 13 February 2011

I've sat through worse........Simon Hughes

There was a goodly turn for Simon Hughes in Southport on Friday night-especially when you consider he was up against Maureen Fearn's Mayor's Ball.. He asked my daughter after what she thought about the evening and she expressed the view that  she had 'sat through a lot worse'-as indeed she has!

Simon was on good form and carefully rehearsed the choices we took to arrive at the place we are now. Each option was appraised and judged to be the right choice. We are in uncharted territory, each time the road diverges we take the one less travelled by. Just how those choices are made mystifies some of us. Why did we back Groves Academy Bill when there are clearly some ill thought through implications? Why was it deemed necessary to sack Lord Oakeshott from a job he doesn't hold just because he forthrightly expressed the view held overwhelmingly by Party members -that operation Merlin fell far short of our reasonable expectations? and why if one of the defining difference between us and the Tories is our attack on the maldistribution of wealth are we allowing the one parliamentarian who has effectively articulated that view to be sidelined?
I do not doubt that great efforts are being made to ensure that when actions need to be taken that fall outside the coalition agreement that there is some proper democratic process at least within the parliamentary party to approve them.

I failed to 'attract the speakers eye' when it came to questions ( I really must overcome my shyness and be more assertive) but I would have liked to pursue the question of inequality. When it came to bankers bonuses Simon counselled us to wait for the banking commission. Let us hope it is not as pathetic as Merlin. I think that we need to be saying what is the minimum we would expect out of the commission. For me that must be the remutualisation of Northern Rock  and the break up of the nationalised banks leading to the establishment of strong regional mutual banks. Ownership is important. As a report from Oxford University shows:

 ......the UK financial services sector is  dominated disproportionately by a single business model, namely the large, shareholder-owned plc. This domination of the shareholder ownership model – whose purpose is to maximise financial returns to the shareholders – proved a lethal combination with the financial deregulation, the creation of new financial instruments and the subsequent rising levels of debt over the past twenty years.  Ever greater risks were taken to drive up financial returns and ‘shareholder value’, culminating in the global credit crunch of 2007-2008 which in turn created the first global recession since the 1930s, during 2008-2009, 

So we should advocate what the Yellow Book called the Diffusion of Ownership. If we do not want to repeat the crash we need to radically restructure the financial services industry and that includes ownership.

Last week in a post I was arguing that part of the 're-balancing of the economy' had to including rebalancing the rights of stakeholders other than capital-in particular employees. Liberals have long advocated models of employee ownership as superior to the dominance of capital. Those arguments which were rooted in the Liberal desire to spread wealth and power go back to J S Mill. Hence over the years Liberal have advocated co-ownership, common ownership workers' co operatives all of which have in common the belief that labour should hire capital. The globalisation of capital markets over the last 30 odd years have added a new economic imperative . Britain's businesses have been bought and sold by merchant banks and hedge funds from around the world whose only interest has been the building of short term shareholder value. The same is true of the banks as the same report makes clear:

The globalisation of financial services has resulted in the ownership of banks and insurance companies being increasingly owned organisations having concomitantly less allegiance to the UK.  The UK insurance market in particular is now largely in the hands of overseas owners, and some see the UK as a saturated and less attractive market – hence Zurich Financial Services’ recent announcement that it is moving its operations to Ireland, AXA selling its life arm, Aegon closing much of its UK capacity, and Prudential’s failed attempt to purchase AIG.  Mutuals by contrast are generally owned by UK consumers and most remain entirely focused on the UK market.

This is a crucial difference as it means their long objectives are firmly fixed on serving the long term interests of their local owners and no dedicated to making a fast buck for some fund that is here to day and gone tomorrow.

This approach will spread the location of financial services jobs and help develop regional economies. It will also mean that if these new mutual/credit unions are focussed on serving the needs of the owners-the customers- they will seek to develop new products to meet their needs. I am particularly thinking about the need for the spread of pension uptake and even the funding of long-term care.

Anyway the central point is that this is a Liberal solution. The Tories will argue in favour the rights of capital and share ownership mode. Labour members are instinctively and increasingly in favour state ownership and control (despite the actions of Balls as City minister) it is Liberal Democrats who must clearly champion mutual ownership in this area and employee ownership in the wider economy.

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