Godfrey Bloom – Europe of Freedom and Democracy Group

The concept of financial regulation across 27 countries most of whom have no experience of financial services is not just flawed but dangerous.  The United Kingdom, yes the City of London, is the only world class centre for financial services in the European Union.  This is not just a matter of fact but a situation deeply resented by other ‘wannabe’ cities who are current third division players.  Notably Paris and Frankfurt.   Regulation therefore is already being moulded not to protect the consumer but to rearrange the spheres of influence within the EU.  No surprise therefore that Paris and Frankfurt have muscled in the division of the regulatory ‘spoils’.

Admittedly London has brought much of this on itself.  I was a member of the bogus Frances Maud’s ‘consultative group’ in 1986 when the first Financial Services Act was mooted in the United Kingdom.  I say bogus because as always with politicians, consultation means nothing of the sort.  It means diktat of the political knee jerk brigade when something has gone wrong.  In this case a failure of an obscure company called Barlow Clowes.

The sort of regulation that followed was totally prescriptive.  A box ticking exercise, doomed to failure in the fast moving world of financial services.  It was prescriptive largely because the regulatory services did not understand the concept of any alternative.  The stepping stones to collapse are plain to see from the record.  United Kingdom Providence Institution, London Life, Split Caps, National Provident Institution, Equitable Life, Northern Rock and others.  Since 1986 London has seen various different regulators.  IMRO, LAUTRO, FIMBRA, PIA, FSA and others.  Gordon Brown constructed the FSA stuffed it with box tickers led by chums of number 10 Downing Street on monster salaries usually with some sort of honour to accompany it.  In the UK Lordships and Knighthoods impress waiters and are much sought after.

This absurd approach to regulating an industry which contributed 40% of the UK’s GDP of course ended in disaster.  No apologies though, in May the FSA awarded themselves a 10% salary increase and a15% bonus.  The traditional bizarre reward for failure much loved by the British establishment.

The European Union, desperately jealous and ever hungry for control of all it surveys, was quick to pounce.  We now have a system so guaranteed to fail companies are fleeing the City as I write.

Why must it fail?  The reasons are many fold.  Once must remember that everything the EU manages fails.  Agriculture, Fishing, Energy, Employment legislation, Immigration, the list is endless.  But let us suppose this history of failure is broken by a miraculous success in financial services, what pointers do we already have?

The Commissioners are hostile to laissez faire capitalism and in particular an entrepreneurial approach to international financial services.  The EU is the ultimate “control freak” organization.  Money is less easy to control than people.  It annoys the institution.  Hence the manic drive for tax harmonization.  They hold that all countries should steal exactly the same amount of tax from their citizens so no sensible, thrifty, small government administration triumphs over their incompetence, corruption and prolifigacy.

This is not a secret.  In my capacity as Coordinator for the Europe of Freedom and Democracy Group I questioned three of the Commissioner-designates who will have responsibility for financial regulation.  Those interviews are recorded on my website I will not detail them here, but notwithstanding their urbane political performances, their intellectual hostility to financial services was there in varying degrees.  It is not generally known in the slowly arousing City of London that 15 of the 27 Commissioners including the President are self confessed communists, Marxists and socialists.  No apology for it, again see my website.

It is important to bear in mind not all banks floundered in the recent crisis.  The old British Dominion banks all survived intact.  Why?  Because they have a completely different system of regulation.  Nothing much to do with boxes administered by clerks and second rate lawyers.  In fact a consumer friendly system of complete transparency so the concept of caveat emptor is guided on to the target.  The only safe system of consumer protection in financial services.  A fool and his money are soon parted is not just a British homily.

Again, see my website, when I put this point to Monsieur Barnier he dismissed my suggestion we adopt their system because “Australia is a long way away”.  I think the recording on my website shows my jaw drop at this astonishing piece of stupidity.  When I got cross I was warned in the corridors by a member of the British Conservative Party that I was in danger of ‘rocking the boat’!

So we have learned nothing from the recent experience from hell.  We are to have more of the same.  Monsieur Barnier, suave, charming, ill informed (he does not believe in commodity trading or selling short, see that web) supervising the Gilbertian absurd Lord Turner who would clearly prefer to be doing something else.

Already the EU is spewing regulation on Alternative Investment Managers.  There is a school of thought Hedge Funds caused the banking crisis, Investment Trusts should be covered by the same regulations.  Risk in banking should be avoided.  Banking is risk.  Risk reward is the ultimate financial service.  It is as though an Oxford Classics Don has been asked to write a pop critique for Now Musical Express.

The British Motorcycle Industry, once thought unassailable disappeared in the early 60s.  The City of London could go the same way. The French of course would enjoy the schadenfreude until they realised the City of London is their golden goose.  The French farmers’ begging bowl will remain empty if the Parisian financial service industry try and take over from London.  Those Iberian peninsula motorways have to be paid for.  The Germans cannot fund the entire shibboleth on their own.

I predict, unless there is a rapid change of direction, the UK financial services industry will go the way of our motorcycle, fishing and steel industry.  Who will benefit?  Ironically no one in the EU.  Zurich, New York, Chicago and Hong Kong.  Where will the great and good be?  Well, be sure of one thing the Barniers and Turners of the world won’t be going hungry.  But they will almost certainly be ‘unavailable for comment’.