Lord Turner was at his iconoclastic best last night. In a lecture to the Cass Business School in London, the chairman of the Financial Services Authority once again questioned the value of Britain’s swollen financial sector and called for tougher regulation on City activities.
“We need to challenge radically some of the assumptions of the past 30 years,” he told the audience, “and we need to be willing to consider radical policy responses.” According to Turner, there are a range of ideas that need to be taken out of the “index of forbidden thoughts” and brought into the mainstream.
Among those radical policies was, pleasingly, the idea of a Robin Hood Tax on financial transactions, proposed by nef back in 2001 and now the subject of a major campaign from a coalition of NGOs, faith groups and trade unions.
Lord Turner also reflected on an interview last year in which he branded much of the activity in the financial sector as “socially useless”. “People have asked me whether I regret those comments,” he said, “The answer is no, except in one very small respect, which is that I think it would have been better to use the phrase ‘economically useless’ or ‘of no economic value added’.” This echoes nef‘s recent report A Bit Rich which found that Elite City bankers (earning £1 million-plus bonuses) destroy £7 of value for every £1 they create.
Turner’s comments come less than a week after the publication of new research showing that London has lost its unique position as the highest ranked financial centre in the world: it now shares that status with New York. The banking lobby has tried to argue that the news should make Government cautious about increasing taxes and regulation on the financial sector.
Here at nef, however, we have long argued that finance should be the servant, not the master of the economy. The protracted financialisation of the UK economy has not brought benefits to everyone. Around 3 million people in the UK still lack a basic bank account, and small businesses find it increasingly hard to obtain loans, as banks moved away from local, high street level activities to prioritise speculation and short-term profiteering. The more we can do to reconnect financial services with the real economy – and especially disadvantaged communities – the better. We might also do well to refocus attention on neglected areas of the economy – such as agriculture and manufacturing – in anticipation of the necessary transition to a low carbon food and energy system.
Lord Turner’s comments show that, contrary to what been said by some defeatists in the movement for a just and sustainable economy, there is still plenty of opportunity to introduce new ideas and challenging, radical policy proposals. The door that was flung open by the financial crisis hasn’t closed yet. So let’s delve deep into that index of forbidden thoughts and see what works. If you’re curious, you can start here.