Brown: The collapse of the UK economy was down to me

Gordon Brown today admitted he made a mistake in not introducing tougher bank regulation when he was chancellor.  The PM, chancellor from 1997 to 2007, said that in the 1990s the banks had all been calling for less regulation.

"And actually the truth is that globally and nationally we should have been regulating them more," he said in an interview on ITV1's Tonight.  The Conservatives said Mr Brown had "failed", while the Liberal Democrats said his admission was "not enough".  The prime minister said he should have put the "whole public interest" before the banks.

Mr Brown said: "In the 1990s, the banks, they all came to us and said, 'Look, we don't want to be regulated, we want to be free of regulation'." ... "All the complaints I was getting from people was, 'Look you're regulating them too much'. And actually the truth is that globally and nationally we should have been regulating them more," he added.

"So I've learnt from that. So you don't listen to the industry when they say, 'This is good for us'. You've got to talk about the whole public interest."

Ed Balls, who worked with Gordon Brown when he was chancellor, said both had previously admitted they should have done more to control the financial sector.  At Labour's morning press conference he said: "In retrospect we should have been tougher with some of the investment banks which did not know the risks they were running."

Business Secretary Lord Mandelson added: "Regulation should have been more intrusive and the regulatory practice of the Financial Services Authority should have kept pace with the fast-changing developments in the financial services sector."

Shadow chancellor George Osborne said: "So finally Gordon Brown admits he failed to regulate the bankers and increased taxes on the poor (removing the 10p tax band). We've had 13 years of his economic mistakes. Britain can't afford five years more."

Lib Dem Treasury spokesman Vince Cable said: "It's not enough just to hold your hands up and say sorry without having a plan for making sure that the same thing doesn't happen again."

Most people (particularly in the blogosphere) know this already, and many (including myself) believe admitting to being partially responsible for the worst economic mistakes for generations is not enough (i.e honesty) - if he had represented us properly (which as Prime Minister is his job!) he would have always acted in our interests (not the banks), if he was a capable leader he would have asked far more questions (rather than simply listening to the banks), and if he was selfless, honest (and honorable) he would have admitted his mistakes at the time (and resigned without question or delay) ... instead of using spin to create a smoke-screen (e.g. a 'global problem') and deflecting blame onto others (e.g. America - which President Obama will never forget) ... both strategies regularly adopted by those who apply Poweromics* (to maintain their grip on Power).  Given we are fining the leaders of Northern Rock for their failings, perhaps we should fine/charge Gordon Brown for his role too**, so he is made bankrupt, never forgiven and never allowed into a position (or to profit from a position) of power again (e.g. relinquishing any right to a position in the Lords)*. 

* Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed. 

** NB In China he would have been locked up and probably receive the death penalty (for 'economic sabotage').

Masters or Servants?

Nick Clegg, the Liberal Democrat party leader, unveiled five proposals to control "the bonus culture" in the City. Clegg said there should be "no rewards for failure" and called for a "top-to-toe" overhaul of the British banking system (including an end to "morally obscene" salaries and bonuses).

"The problem started with the banks so the solution must start with the banks too," he said at the party's daily news conference yesterday, and he said the public should feel that "never again are your everyday savings held "hostage" by people in the City.

The Liberal Democrats' five-point plan to reform the banking system would:

1. Limit cash bonuses to £2,500 annually, with any bonuses in excess of this figure to be paid in shares which could not be sold for five years
2. Ban board directors from receiving bonus payouts
3. Extend the Financial Services Act so loss-making banks were not allowed to pay bonuses
4. Ensure the names of all banking employees earning more than the prime minister were published
5. Lead to directors of banks being fined if their institution broke the industry's code of practice

These five steps would "transform the culture of greed which continues to disfigure the banking industry in this country" and ensure the banking system became "the servant, not the master", Mr Clegg said.  

The party's Treasury spokesman, Vince Cable, said the UK was "still in a major economic disaster" and that "The country is now poorer than it was before the banking crash and what we need to be focusing on is how we prevent it happening again” (echoing many of the posts on this blog).

Mr Clegg said it would reveal a "new approach" to a financially-stable economy, based on equity not debt, "where we learn as a country to build things again, not just bet on things on computer screens in the City" … from a leader who may well yield significant influence/power in a few weeks time this is good to hear, but he will need to think more carefully about the steps needed to successfully transition from an outdated and flawed economy (Poweromics) to a 21st century value adding economy (Leanomics) … and just like President Obama made clear, we must ensure the banks pay taxpayers every penny back (and make sure investment banks are separated from commercial/high street banking too).

In my humble opinion, Vince Cable appears to be the closest to identifying what a successful 21st century economy needs, having also hosted sessions promoting the introduction of a Land Value Tax (to replace unjust/unfair taxes) for instance. The Liberal Democrats also want to completely overhaul the archaic (19th Century) voting system, so MP’s properly represent (and are held accountable to) the people they are supposed to serve. 

If you’re relying on others to help you – good luck – you’ll need it. Labour are relying on spin and clearly cannot be trusted e.g. this week Brown stood up to tell us there will be no more income tax rises … but he said that last time, and watch out for National Insurance everyone, which is just another name for the same thing (n.b. they’ve given no guarantees on this one and Brown has also raised it before) – why did the press (e.g. the BBC) not ‘press’ him on this…?  As for the Tories, Cameron has said he wants to give people ‘power’ (e.g. by letting parents set up their own schools – more of a gimmick than a practical solution), but at the same time has no desire/interest in changing how MP’s are given power or wield (e.g. profit from) power.  Instead the Tories want to slash public spending, change inheritance tax laws to favour the rich … and would vehemently oppose changing/removing unfair taxes and replacing them with a Land Value Tax (as the Tories represent, and are heavily backed by, all the rich land owners/bankers profiting heavily from land without adding any value at all). 

The election provides an opportunity to allow a little more common sense to filter into our Economic/Political System (e.g. values, fairness, justice) and if this happens our failing economy may actually start to turn around.  If it does not it will simply continue its downward spiral (don’t be fooled by any apparent ‘recovery’ – as the Government simply postponed all the ‘pain’ until after the election) until the situation gets so dire that people finally decide to do something about it – but at this stage it’ll probably be too late to successfully turn things around (NB I do not support any political party and like most people hold the vast majority of MP’s in contempt – however I do care about people’s future, the state of the economy and the level of democracy in the UK).

Let’s see what the next few weeks hold …

Reforming banks - A fight to the death?

Whilst some (e.g. Gordon Brown) focus on spin, others focus on substance (e.g. Barack Obama).  Whilst some try to paper over the cracks (e.g. UK), others try to focus on solving the problem (e.g. USA).  This has become ever clearer over recent days and weeks .... in relation to dealing with banks ...  

Gordon Brown decided to introduce a one-off 'bonus tax' for bankers, which involved far more spin than substance.  Barack Obama on the other hand plans to introduce a bank levy and made it clear 'Wall Street' must pay back all the $117bn (£72bn) that US taxpayers are expected to lose from bailing out the banks during the financial crisis. "My commitment is to recover every single dime the American people are owed ... We want our money back and we're going to get it", the President said.


However over the last two days he has gone much further.  President Barack Obama has proposed significant new curbs on the activities of banks to try to prevent future financial crises.  The plans include limits to the size of banks and restrictions on riskier trading. "Never again will the American taxpayer be held hostage by banks that are too big to fail," Mr Obama said.   He added he was ready for a "fight" with any banks prepared to lobby against tougher regulations.


"While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse," Mr Obama said.  His proposals also include a ban on retail banks from using their own money in investments - known as proprietary trading. Instead, banks would be limited to investing their customers' funds.


I, and many others in the blogosphere, have regularly pointed out the fallacy of allowing retail banking and risky investment banking being joined together and remaining together, but the UK Government has singly failed to address this issue, and the BBC failed in it's duty to press home this issue either.  


Mr Obama's proposals appear to be a return to the principles underlying the Glass-Steagall Act. That law - from the 1930s in the aftermath of the Great Depression - separated commercial and investment banking and was eventually abolished in 1999 under President Bill Clinton.


"I am proposing simple, common sense reforms" Mr Obama said, and vowed "If these folks want a fight, it's a fight I'm ready to have".

When 'deflecting blame' gets 'exposed' ...

Arguably one of the best political questions* in recent times managed to flummox the great Orator (President Obama), and saw Prime Minister Gordon Brown rapidly lose his smile & schrivel in his shoes ... 

Take a look at the video footage and the Guardian's summary here ... it was a classic question, with a classic outcome ... well done Nick ... though I bet your special seat next to Gordon on official visits is harder to come by now!

* Nick Robinson asks Obama if he agrees with Brown about the US causing the crisis - something Brown has said repeatedly over here, but something he fails to mention in his trips to Washington (NB deflecting blame is a common strategy used by people who apply Poweromics ... and creating 'fear' amongst people is too ... watch out for this one as we get closer to the election ...).

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Take a look at my posting on Stephanomics blog "Spending rows" below, as well as my own posts "honesty - honestly" and "economic fools" on these subjects too ...

Post 4 (leanomist) wrote:

Let the battle unfold: Honesty v Spin

Go for it Alistair, tell us the truth, and please remember to include the fact that the UK's economic woes are mostly 'home grown' and were 'systematically manufactured' by Gordon Brown during his 10 years as Chancellor - and not by America, or anyone else in the world for that matter, which he would like to make us believe * and is relying on Mandy to help him with ...

David Clift, a Future 500 Leader

* remember Nick Robinson recent question to Obama & Brown, brilliantly exposing Gordon Brown's use of the blame game ... (ie it was the USA, and nothing to do with me!) ... for example take a look at http://poweromics.blogspot.com/2009/07/when-deflecting-blame-gets-exposed.html and other examples / information provided there too.

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