THERE is something magical about the Lord Mayor’s annual banquet at the Guildhall. One is surrounded by pomp and pageantry; all the guests are decked out in white tie and tails, and dozen upon dozen of Britain’s top business executives make the time to listen to the Prime Minister, the Lord Mayor, the Lord Chancellor and all the others. So it made sense, I suppose, for David Cameron to use his first speech to this august gathering to try and mend fences with the City and talk up Britain’s economy and place in the world.
Yet it didn’t quite work. Everybody knows the UK retains a large economy and that London’s financial services industry remains huge. But anybody could have said that at any time during the past decade. Stating the obvious isn’t clever. The real point is that power is seeping away from the UK. For hundreds of years, the buck stopped with the people in the room last night, London-based merchants and politicians; increasingly, however, it is moving to European Union institutions and others who don’t have the UK’s best interests at heart. Take the looming Irish bailout. Under the European Financial Stabilisation Mechanism, Britain must stamp up for 13.6 per cent of any monies channelled to Ireland. This could cost UK taxpayers €8bn – more if Portugal and Greece also require funds. Or take the row over bonuses: the real power now lies in the hands of the Committee of European Banking Supervisors, not the FSA or even the government. The new EU rules will be published next month and come into effect on 1 January 2011. The new sheriffs in town include the European Banking Authority (London-based but a European body on which the UK will only have a tiny voice); the European Securities and Markets Authority in Paris; and the Occupational Pensions Authority in Frankfurt. Perhaps in future years, they too will be given starring roles at Guildhall banquets (my kind of nightmare). Private equity and hedge funds are now regulated from Brussels. We are also facing a review of the market in financial instruments directive. With the EU in charge, the people around me in the Guildhall last night have been downgraded to the role of lobbyists. Some claim that the EU must take control because Britain failed. It is true UK monetary, regulatory and fiscal policies were a disgrace; the Labour government paid the price for its incompetence. But that doesn’t justify handing power to unaccountable bureaucracies. European countries and Brussels itself failed even more miserably on every count. The single currency was one of the drivers of boom and bust; continental banks were destroyed in far greater numbers than UK institutions; European governments borrowed even more recklessly than Northern Rock. The real answer is to decentralise power, and make governing structures as local and accountable as possible. Some coordination is necessary, of course. But competition and experimentation work for companies; they should also be made to work for nations. If anything, London itself should gain more powers, just as City-states such as Singapore and Hong Kong govern themselves. We need a new localism in financial and economic regulation, just as we need it everywhere else, to allow fresh solutions to emerge. Top-down pan-European policies will only kill off our prosperity. Until we relearn this truth, the tragedy is that gatherings such as last night’s will progressively be robbed of their meaning.