Outlook Anyone who has ever been asked that dreadful question at a job interview – "What would you say are your greatest weaknesses?" – should have some sympathy with the predicament in which Gordon Brown found himself last night. Asked to pinpoint his biggest mistakes in office on ITV's Tonight programme, the Prime Minister faced a difficult balancing act. Had he conceded no mistakes, he would have looked terribly arrogant. But admitting to too serious a blunder would have left him open to the charge of incompetence.
In retrospect, Mr Brown may feel his admission he was too quick to listen to bankers' pleas for deregulation in the late 1990s was a step too far in the latter direction. The Conservatives and the Lib Dems were happy to seize upon the Prime Minister apparently coming clean that his Government's policies had, after all, contributed to a financial crisis which he has previously blamed on excesses and abuses that originated elsewhere.
Still, we can argue about to what extent poor regulation in the UK was a greater or lesser contributory factor in the crisis than, say, the securitisation of subprime loans in the US until we're blue in the face. What's more interesting, as we try to decide which party represents the best chance of averting future crises, is where Mr Brown and his rivals stand now on regulatory reform.
The note doing the rounds in the City from Credit Suisse's influential banking analyst Jonathan Pierce makes intriguing reading in that context. His view is that an outright Labour victory would be better news for the banking sector than either a Conservative win or a hung parliament. Broadly, Mr Pierce's argument is that while Labour's regulatory reforms are mostly implemented, the Tories and Lib Dems want to change the system again – and in some ways to go further.
Accepting that premise – and if you take the view that what's good for the banks is less so for the rest of us – the implication is that Mr Brown has not learnt as much as he might from the errors of a decade ago.
It's certainly the case that Labour's regulatory reforms feel less ambitious in their scale and reach than, for example, the break-up of the banks that President Barack Obama was again pushing on Capitol Hill yesterday. And for those who want to see the banks pay for previous misdemeanours, the Conservatives' insistence that they will impose a new levy on the sector whether or not the G20 meeting in June reaches agreement on an international version of such a tax has a certain appeal.
And yet, is the gap between Labour and the Conservatives really so great? Alistair Darling may not want to make the case for breaking up the banks quite so overtly as President Obama, but he believes the new rules and requirements on capital and liquidity that the Bank for International Settlements in Basel is currently working on will produce a similar effect. And though Mr Darling opposes a unilateral levy on the banks in the UK, he expects the G20 to approve a multilateral charge.
The other issue is the structure of financial regulation. The Conservatives want to abolish the Financial Services Authority and move its responsibilities, minus consumer protection, to the Bank of England. Labour prefers the status quo.
The jury is out, but a good part of the argument is over the name above the door of the regulatory authority. The more significant question is the powers this authority will have to intervene as market bubbles develop – the so-called macro-prudential toolkit. And we have no clear picture yet of what that toolkit might look like from any of the parties.
We need to be confident that our political leaders are not unduly swayed by vested interests – and that they are bright enough to hear the alarm bells before a full-scale crisis engulfs them. In that sense, Mr Brown was right to identify the deregulation of financial services as one of his biggest mistakes. The charge that he has failed to learn his lesson is not yet proven, but would be far more reprehensible.Reuse content