“The ideological vision behind the Financial Services and Markets Bill is… a low pay, insecure economy dominated by a bloated financial services sector that plays dice with the lives and livelihoods of everyone else.”
By Sam Browse
After a mini-budget that announced tax cuts for corporations, an abolition of the 45p rate, and lifting the cap on bankers bonuses to address the crises engulfing the UK economy – not to mention aggressive attacks on the right to strike as workers across the country take action to defend their pay and conditions – the Thatcherite character of the new Tory leadership could not be clearer.
The announcements have rightly garnered massive opposition – even from some Tory backbenchers concerned about the optics of giving a tax break to the richest in society while everyone else struggles to pay for heating or the weekly shop. Although the Prime Minister and Chancellor claim to “get it”, their U-turn on abolishing the 45p rate demonstrates more that their backbenchers “get” the probable electoral consequences of stuffing the pockets of the wealthy during a cost of living crisis.
Even with the U-turn, the abolition of the top rate comprised only £2bn of the £45bn giveaway set to benefit the wealthiest in society. And now the package includes the promise of eye-watering austerity to calm gilt and bond markets spooked by unfunded fiscal commitments. Fanatical neoliberal shock treatment is still very much on the agenda.
Although the mini-budget measures are not due for debate in parliament until spring next year, the Thatcherite rationale behind them was prefigured in another piece of legislation quietly tabled before the conference season. Like the neoliberal bonanza of Kwarteng’s September “fiscal event”, it must be completely opposed.
The Financial Services and Markets Bill represents the beginning of the Tory’s post-Brexit regulatory reform for the financial sector – an agenda described by the now defeated Conservative Leadership candidate, Rishi Sunak, as “The Big Bang 2.0”, citing the Thatcherite “Big Bang” reforms that laid the foundations for the 2008 crash.
Sunak may have lost, but the ideological vision behind the Bill is one supported by the entire Tory hierarchy and the new Prime Minister, Liz Truss – a low pay, insecure economy dominated by a bloated financial services sector that plays dice with the lives and livelihoods of everyone else.
At the Bill’s core is a statutory duty on the regulator to encourage “growth and competitiveness” in the UK financial services sector – the same race to the bottom culture which saw the irresponsible trading of toxic financial products in the run-up to the 2008 crisis.
The legislation will also let speculative forces rip in commodity futures markets, repealing European laws that encourage transparency in trading and put limits on the number of futures contracts that can be held by a single investor. While riven with loopholes, these curbs on the speculative power of financial institutions are important – without them, the price of essentials could become even more volatile.
Take food. Producing grain takes a long time. If a farmer wants to guarantee an income, they’ll enter into a contract with their buyer to lock down a price now, guaranteeing that they’ll make enough money when they sell, later. Future contracts are a way of providing food producers a stable income. Except there’s also an international “swaps” market in the contracts. Speculators buy them up, betting on future food shortages. It acts as a pressure on food prices, decoupling the cost of food from its real market value and causing massive price volatility. In “betting on hunger”, the bankers’ gambling results in chaos for the cost of living.
Rising food prices have widely been blamed on Russia’s war in Ukraine – but both countries combined account only for 13% of global wheat production. While it has exacerbated the problem, food prices have actually been increasing since long before the war. One of the reasons for that is price speculation on international commodity markets. The proposals to ditch already meagre regulations will make the situation worse.
The Tories are carving the contours of a new economic landscape that will set the terrain in which industrial struggles are staged – one in which workers will face the Sisyphean task of pushing real wages up the hill, only to see speculative price booms tumble them back down. Not only, then, must we stand firmly with all workers fighting against real terms pay cuts, but we must also offer a political alternative to Conservative Party economic planning.
We need a financial system that works for people and planet. That should mean more regulation for the City – not less – and ensuring that those tasked with enforcing the rules aren’t legally obliged to cheer on irresponsible behaviour. While the Bill will make “growth and competition” of financial services a statutory aim of regulators, it only says that “due regard” should be paid to net-zero targets.
It is ludicrous that an already bloated sector should be legally mandated for growth and competition, while being asked only to be mindful of the greatest existential threat facing humanity – the climate emergency. The former should be ditched entirely, and the latter taken seriously – it should be a statutory requirement that financial institutions act in a way that promotes green growth and climate-friendly trading and investment.
But we also need rebalancing away from the City with serious investment in the real economy. Another part of the reason we’re so exposed to rising prices is that our economy is internationally competitive only in business and financial services and we rely on imported goods. The balance of trade deficit further devalues the currency – which has crashed against the dollar following the mini-budget, and hovered around a 37-year low for weeks – making imports more expensive. For a country that takes delivery of over 50% of its food from abroad, this only exacerbates precipitous price increases.
A massive state-led investment in infrastructure and skills, alongside a serious green industrial strategy, would help to address some of these structural weaknesses – not only rebalancing our economy away from the casino banking the Financial Services and Markets Bill wrongly seeks to promote, but also making us more resilient to future price shocks.
The labour movement is currently engaged in the heavyweight fight of its life against the boss class and their representatives in parliament. But as any boxer will tell you, where you put your feet is often as important as the speed and power of your hands. The Tories are attempting to shift the ground on which we are fighting – not only through fiscal policy, but a fundamental reshaping of the economy. We must match the hammer blows of our industrial action with a politics that deftly manoeuvres us toward stronger regulation of the spivs and speculators – and the surefooted terrain of a real economy that puts people and planet before profits and soaring prices.