Standing at a bar last week, a friend murmured that he thought it was “sick that the CBI top table wore lounge suits”. It was, I suppose, symptomatic of the breathtaking speed with which events have occurred in the first three or four weeks since New Labour took office that I hadn’t the faintest idea what he was talking about. When politics is defined by fashion statements, I know things are moving too fast for me to grasp.
Frankly, I am not much bothered whether the Confederation of British Industry chooses to wear black tie, white tie or off-the-shoulder frocks in deference to the new Chancellor, Gordon Brown. What I am concerned with is whether British industry will wear the changes that Brown has instituted in the body economic in his first month in power.
I didn’t intend to return to the subject of British industry’s relationship with government so soon after the election. But then I didn’t expect that relationship to be changing so soon after the election. And, I have to say, the speed of events has also served to mask some implications for British business that should be flagged up even as we are swept along by the Government’s rush to reform (and dress casually).
In the last edition before the election, I urged marketers to vote Labour (it was Marketing Week wot won it). On the three counts that really matter to British marketers – the economy, Europe and regulation – I argued that the Conservatives were a busted flush and that New Labour offered hope and construction.
It is too early to change that view, but it could be argued that Brown has indulged in some destruction by torpedoing his own Government’ s ability to fix interest rates and annihilating the Bank of England’s role in banking supervision.
In fact there’s something rather sinister in Brown’s decision to devolve responsibility for interest rates into a nine-strong monetary policy committee at the Bank. Brown’s initiative over ceding interest-rate control may be an attempt to manipulate policy in Europe by abrogating some responsibility for the economy.
It will be fascinating, will it not, to see whether Brown and his colleagues in Government to take us into the first wave of European Monetary Union in 1999. It will be equally fascinating, if sterling is outside EMU, to watch its value and how it is manipulated in subjugation to a single currency for political effect. By manipulation, of course, I mean interest-rate policy. And if, in the environment of a single European currency, it serves the Government’s purpose to deflate the value of sterling to assist British exporters, then the tactical application of interest rates becomes a potent weapon.
Now, if that happens and interest rates take off to truly stratospheric levels, the Chancellor may find it very convenient to be able to say that the setting of interest rates in not a matter for him.
Memories of the wretched Norman Lamont throwing interest rates all over the shop in a vain attempt to keep the pound within the narrow band of the Exchange Rate Mechanism are still fresh. In Britain’s emerging relationship with EMU, Brown will wish to avoid the wrath of British importers and exporters – and what better way than to point the finger of rate blame at the Old Lady, while claiming no political responsibility for the value of sterling?
Brown is no more interested in having a Black Wednesday in the run-up to monetary union than he was in having a black-tie Tuesday last week. I could be accused of conspiracy theory here, but it is worth wondering quite how craftily the Chancellor is planning his and his country’s economic policy during the currency debates to come.
The other area of British business that I identified as having a better future under Labour was regulation. What the Chancellor has so far given to the Bank of England in interest-rate control he has taken away in regulatory responsibilities. The current Governor is said to be cross that he wasn’t consulted. Well, tough. Banking supervision – witness BCCI et al – has been far from sound over the past decades and the self-regulatory framework for financial services has been rubbish.
Simply moving all the regulators into one super-regulatory body will not be enough. Instead of several rubbish regulators, we could end up with one big rubbish regulator. But it’s a start. What really worries me is Trade Secretary Margaret Beckett’s capacity for overturning the Office of Fair Trading’s advice and referring the award of two train franchises to National Express to the MMC, apparently on a whim. I bet it worries those waiting for a decision on the acquisition of Carlsberg-Tetley by Bass even more.
I said at the start of the elec-tion campaign that Labour had some work to do in winning confidence in the City – but perhaps it doesn’t care.
None of this leads me to regret plumping for Labour at the election. Progress is made through change. I just didn’t expect it to come so quickly and, in the case of Brown, with quite such Machiavellian intent.