The sheer audacity of the Leader of the Opposition is spectacular to behold. The preceding government’s policies in relation to the markets of financial services and energy are precisely why these two areas are on a bad course.
In order to change the direction of travel and rescue these crucial aspects of the UK economy, serious rectifications are required. We simply cannot allow Mr Miliband to blame the present government for the current failings, and offer solutions to problems he is responsible for. How can you get away with legislating a problem into existence, look appalled at the resultant impact of the legislation and offer more negative legislation to solve the very problems that you designed?
Take the financial services industry, where Mr Miliband has promised to break-up the big five banks by statute. Perhaps he has voluntary amnesia but on the last government’s watch banks were forced out of business until the few we have left remained. This all stemmed from the Financial Services and Markets Act 2000 which saw the establishment of the Financial Services Authority. The cost of compliance, emanating from the FSA’s 10500 page long handbook, drove the small providers out of the market. The regulation forced the consolidation of the industry, which is precisely what created the too-big-to-fail system we have presently.
Mr Miliband has correctly identified a lack of competition but he ought to concede that he and Mr Balls, who were in the Treasury advising Mr Brown at the time, are culpable.
It is an incredibly warped logic to regulate banks to the extent that their competitors are driven out of business, look at the resultant monopolistic-like behaviour from the few that remain and figure that more regulation by means of splitting them up is the antidote. The announcement of the break-up policy has jeopardised the Chancellor’s intention to privatise more of RBS and Lloyds, as close to a billion pounds has been knocked off their share value. The man’s too hazardous for the position he’s presently in, let alone that which wants to be in. The too-big-to-fail culture was created while he was at the Treasury and yet now we’re all meant to think he’s our saviour.
The same is applicable to the energy industry.
The general consensus seems to be that there are failings and the big six firms are like a cartel. Mr Miliband tells us of his intention to break these up too, again wiping a substantial amount off their share value and encouraging them to halt investment in our energy provision – thus undermining our nation’s energy security. As with the financial services industry, he is responsible for driving providers out of business and leaving us with the few that remain. In this case he was directly responsible as Energy Secretary where he brought in the Climate Change Act 2008. The slight alleviation of regulations recently has allowed for over a dozen small energy companies to start coming to the fore. Only competition can drive costs down and curtail the domination of the big six, not the diktats of Whitehall.
Under the guise of broken markets Mr Miliband is able to justify his hugely interventionist policies, despite the fact consumers are not faring badly: we have free current accounts – that’s not true in most European countries – and in the energy sector our bills are substantially lower than the European average.
If the moderate intervention illustrated above in the markets of financial services and energy has caused so much destruction, imagine how calamitous this further and more comprehensive intervention will be. Mr Miliband must be reminded that previous intervention has landed us in this mess and further intervention will leave us saddled with problems for decades to come.