Brown hits the ground not running but sprinting

Another day, another stonker of an initiative from Gordon Brown, our new Chancellor. The way things are going, anyone would think he was the Prime Minister, not Tony Blair. Mr Brown has hit the ground not so much running as sprinting, and while this latest piece of reform may lack the same seismic, long-term import of his previous announcement affecting the Bank of England, this is none the less big-league stuff.

It is also an eminently sensible piece of institutional reorganisation, so much so that the real curiosity is that it has never seriously been contemplated before. For this we can largely blame the Bank of England, which until Howard Davies arrived as deputy governor a couple of years back refused to countenance any question of separating its monetary from its supervisory functions. Since then the Bank has been dropping heavy hints that it might be prepared to trade away these powers in return for independence, but even this was done with reluctance.

This dogged defence of turf has long been a cause of some bemusement, for being responsible for supervision has never brought the Bank anything but grief. Regulatory failure has to varying degrees been a contributory factor in all the last three big banking collapses, Johnson Matthey, BCCI and Barings. The effect has been to tarnish the Bank's reputation more generally and undermine its case for independence. If the Bank cannot be trusted with supervision, how could it be trusted with monetary policy, was the all too frequent observation.

Never mind the fact that the Bank is actually a rather good supervisor and getting better at it all the time. Per head of staff relative to banking failure, it is one of the most effective regulators in the world. However, it is not for the unpublicised successes that regulators get judged, but for those high-profile cases that slip through the net. Post Barings, the Bank has come to accept that there might be a reputational case for severing its links with supervision.

There are also some very practical reasons for doing so. First, it would not be appropriate for such an important regulatory function as banking supervision to be handled by an independent central bank. The Bank's insistence that great benefit is derived in the conduct of policy from what it learns in pursuing its duties as a supervisor was never a convincing one. Much better to make supervision directly accountable to government through an enhanced SIB (or Investor Protection Agency, as we may have to start calling this behemoth once it has absorbed all the other City regulators).

Second, globalisation and rapid growth of financial services and markets have blurred the borders between modern securities regulation and old style banking supervision. As Barings illustrated, this is already causing a dangerous confusion in lines of responsibility and action. The two functions, then, are in any case being driven together by a common need and purpose.

There is also one further good reason for going this route - it gives Howard Davies a big job to do. So much so that a cynic would suspect he might have had a hand in persuading Mr Brown of the sense of this approach. Not true. Although it looked as though Mr Davies had been left out in the cold by the announcement of operational independence for the Bank two weeks ago, he played no part in this latest development. All the same, it's good to see such an accomplished practitioner making the transition between governments, for in his brief reign as deputy governor he has made great strides in revitalising the Bank's demoralised supervisory ranks. We can expect more of the same once he takes over at the SIB.

As for the planned wider regulation of City regulation, there is thankfully going to be a period of public consultation on all that, both on its structure and funding. The new Government is none the less off to a good start. This isn't change for the sake of it, but rather, a long overdue and necessary reform.

Electricity reforms heading for more delays

The electricity supply industry has fallen foul of Professor Stephen Littlechild again, and 20 million domestic customers can but sit back and watch the sparks fly - unless of course the lights go out first.

The cause of the dispute this time is how much it will cost the regional electricity companies to gear up for 1998 when they lose their cosy monopolies and emerge blinking into the harsh light of competition. According to the RECs, the bill for all the new computers and software that will be needed to make the changeover a success works out at pounds 854m, or pounds 43 for each customer in the land The professor says it will, at most, cost pounds 383m. Clearly the RECs are trying it on.

Since electricity supply only accounts for 6 per cent of the total household bill, it is becoming apparent that, whatever the true costs, the benefits to customers of shopping around will be negligible.

The professor disputes this, insisting that competition in supply will give the RECs increased incentive to buy their electricity more cheaply. This will deliver meaningful price reductions because generation makes up a much bigger proportion of the average household bill.

The reality is that the RECs have got the professor over a barrel. In truth they are not interested, nor ever have been, in competing in anyone else's franchise market and have done their best to sabotage the whole project. Now some of them are telling the professor that if he is not prepared to make customers pay for their gold-plated computer systems then he had better put back the whole process or risk a meltdown.

Liberalising the market but failing to deliver worthwhile price cuts would be an embarrassment to the professor. But presiding over the collapse of the system would be unthinkable. Stand by for more delays to the timetable.

Perceptions of UK catch up with reality

What has changed in a year to cause Britain to scoot on up the World Economic Forum's league table of international competitiveness into seventh position? Not much is the honest answer, but these rankings never were a very objective or scientific exercise.

The text of the report claims Britain's progress is the reward for the upheaval of deregulation and privatisation, and for the two recessions that accompanied the creation of a flexible labour market. There are few experts who would argue any longer with the view that the reforms of the Thatcher years did boost the British economy's potential for growth, but the most important of them were in place by the late-1980s.

The truth is that the jump reported in the latest findings is the result of perceptions catching up with reality. Most of the hard figures that go into the construction of the rankings change very little year to year. What changes most is the results of the survey of international executives which also feeds into the league table. It is these executives who have realised at last that we are now well over the British disease.

News
people
News
people And here is why...
News
peopleStella McCartney apologises over controversial Instagram picture
Life and Style
Laid bare: the Good2Go app ensures people have a chance to make their intentions clear about having sex
techCould Good2Go end disputes about sexual consent - without being a passion-killer?
PROMOTED VIDEO
Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
News
i100
Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
News
people
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsWelsh town changes its name, but can you spot the difference?
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Kristen Scott Thomas in Electra at the Old Vic
theatreReview: Kristin Scott Thomas is magnificent in a five-star performance of ‘Electra’
News
Destructive discourse: Jewish boys look at anti-Semitic graffiti sprayed on to the walls of the synagogue in March 2006, near Tel Aviv
peopleAt the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
Life and Style
Couples who boast about their relationship have been condemned as the most annoying Facebook users
tech
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Time to stop running: At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity

Time to stop running

At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence