ALEX BRUMMER: Self-inflicted Conservative leadership battle puts Square Mile in grave danger

  • City minister John Glenn, a Square Mile trustee, is a casualty of the Tory leadership battle
  • The opportunity to cut red tape since Brexit has left a political vacuum
  • “Once-in-a-generation opportunity to change insurance regulation” is difficult

The rumbling train of government has not been completely stopped by the shenanigans in the Tory party.

The desired tax changes, including the reversal of next year’s sharp rise in corporation tax from 19 per cent to 25 per cent, are not being considered by the cabinet but will be considered at the election.

The new chairman of the Financial Conduct Authority (FCA) is coming to town not too soon. Ashley Alder has been barred from the Securities and Futures Commission in Hong Kong, not always the happiest of hunting grounds for the city’s law enforcers.

Political vacuum: One of Britain’s big potential gains outside the EU is the chance to ditch Brussels red tape

Martin Wheatley, the Hong Kong regulator turned head of the FCA who “promised to shoot now and ask questions later”, was sacked in 2015 by the then chancellor George Osborne. He managed to wipe billions of pounds off the stock market value of British insurers with an ill-timed briefing.

FCA could do with an injection of energy. Unfortunately, Alder won’t make the switch straight away as he won’t start his £170,000-a-year job until 2023.

As Hong Kong’s regulator, it would be interesting to know what Alder has done to preserve the capitalism there, which has moved into commerce during the suppression of political and economic freedoms in Beijing. One might also wonder what he made of the London Metal Exchange’s (LME) failure to deal with the nickel market at the start of the war in Ukraine.

The Hong Kong Stock Exchange owns the LME, which is the subject of an unpublished investigation by the Bank of England and the FCA.

It was hoped that the arrival of Nikhil Rathi as FCA chief executive after Andrew Bailey led the bank would clear up the backlog.

A dozen years after the Great Financial Crisis, the report on the culpability of Halifax Bank of Scotland (HBOS) executives is still tied up in legal knots.

The outcome of another inquest into whether Lloyds had a cover-up for fraud at the former HBOS branch in Reading is yet to be known.

This writer and many readers await the publication of an investigation into how up to £1 billion was put at risk when Neil Woodford’s investment funds were closed in 2019. The scandal is a constant shadow over the FCA, authorized fund director Woodford Link and investment platform Hargreaves Lansdown, which shamelessly advertised the collapse.

If all that wasn’t enough, the FCA has been the target of a vicious mass action and is tasked with securing Brexit for the financial services sector.

It doesn’t help that City Minister John Glenn, who is trusted in the Square Mile, has fallen victim to the Tory leadership battle.

One of the big potential gains for Britain outside the EU is the chance to get rid of the red tape of Brussels.

As the Bank of England’s chief regulator, Sam Woods, noted, this is a “once-in-a-generation opportunity to transform insurance regulation.” Whether this can happen in a political vacuum is unclear.

Nigel Wilson, chief executive of insurer Legal & General, wants action to be taken to revise the rules as soon as possible.

If that doesn’t happen, valuable infrastructure investment could flee to the US and other countries. A collision with a self-inflicted Tory flagship puts the Square Mile in grave danger.

Blunted arrows

Very few Japanese politicians have left as big a mark on global economic thinking as Shinzo Abe. His murder is a tragedy not only for the Japanese people, but also for radical ideas.

Abe’s “Three Arrows” reforms — flexible fiscal policy, monetary expansion and structural reform — have pulled Japan out of the inertia that led to a “lost decade” after the collapse of the housing bubble and a period of deflation.

When I reported on the crisis two decades ago, Japan seemed like a lost cause.

Parks turned into neat tent cities for the unemployed, and families were trapped in negative equity.

Since then there have been bursts of innovation, with Japan at the front of the pack with hybrid and hydrogen cars, advanced electronics and carbon fiber for a new generation of aircraft.

Abe’s $116 billion fiscal package in 2013 was designed to restore a steady 2 percent growth rate. The goals were not fully achieved, but Abe pulled Japan out of deflation, restoring faith in capitalism when the postwar miracle seemed to dissipate.

His legacy will not be forgotten.


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