Skip to the content

Adair Turner and the unaskable question

By Charlie Parker | 14:20:13 | 27 August 2009

Adair Turner's move today to back a global tax on bonuses and urge consideration of a tax on financial transactions will grab the headlines.

Sceptics will say that he is trying to align himself with the likely incoming chancellor George Osborne (and showing more loyalty to him than either the City or the regulatory body he chairs).

Rarely has one man generated some much instant rage among City types as Turner did this morning. This from commentator Howard Wheeldon: 'Quite honestly I am appalled, disgusted, ashamed and hugely embarrassed that I should have lived to see someone supposed to be held in high esteem and that who already commands a senior and crucially important position as effective head of the UK regulatory regime making such damaging and damning remarks.'

So just to be clear Howard, you're not in favour? The British Bankers’ Association chief executive Angela Knight was interviewed with me on the BBC World Service and she did not vent any anger. Indeed, her general tone was one of disbelief: 'Surely you are all misunderstanding; Adair Turner would not say such a thing.'

The knee-jerk response is one of self preservation and it is not unreasonable.

But Turner is a man who likes to stretch his intellectual legs under the table. In reality, this is Turner at his best, using his intellectual prowess to survey the broadest possible range of options and challenge orthodoxy.

He is asking the unaskable question in the City:is it really worth it? Up until now the City, government and academia has acknowledged the central point that maintaining the competitiveness of the City of London should be a primary aim for the British economy.

But Turner seems to have reached the view that society is simply paying too much to the financial system in order for it to allocate money across the economy for us.

I suspect this new thinking will not shake off the assumption about the importance of the City. But it should be its wake-up call. He is saying quite clearly. 'You can cost more than your usefulness, you know'.

One thing is for sure, Turner is now engaged on his own intellectual sojourn, which bears no real relationship to the policy of the regulator he still chairs.

Comments (3)

will henry - guilty banks

12:15 | 28 Aug 2009

adair turner is right to question the

pre eminent position of the city. while

both tories and labour fawned over

'the city', germany and france held fast to their industrial base. we abandoned ours seeing 'the city' as

the saviour of

britains future. they repaid us with a gigantic smack in the mouth. the basis of good investment is a broad and diversified portfolio - and its no different for a country. of course 'the city' objects to turners thinking, do turkeys vote for christmas? the banks behaved criminally in putting thousands of people out of work. they should collectively face a fine of at least one hundred billion which could be used in jobs creation. therafter, they should be subject to a new glass-segal regime and a tax

on diectors 'bonuses'.

Realist

10:51 | 30 Aug 2009

Is Turner right to question the pre-eminence of the city? Absolutely, but he's off on a flight of fancy on this one. To publicly suggest a move towards a Tobin tax is irresponsible given his position as the head of one of the tripartite regulators and can only do harm to perceptions of the UK from abroad. And, let's be clear, the city has done very well for the UK for a very long while.

Have mistakes been made? Yes, including by the FSA which Adair now leads (and particularly having modelled the crisis and then taken no action, which they should never live down). But should the city and its institutions be dismantled as punishment? Absolutely not. As you so rightly point out, it's what we have left to bring about a recovery, so let's not try and destroy it, eh? Change it, by all means, but not destroy it.

The banks did not behave criminally in putting thousands of people out of work. They had little choice, and where exactly are the funds going to come from to pay a £100 billion fine? The UK will make an excellent return on the bail-out monies (something which Gordon Brown got exactly right and was then replicated around the world, by the way), which should more than cover the initial outlay.

What the banks face at the moment is a ridiculous government position saying on one hand "lend to business" and on the other hand "rebuild your balance sheets and don't undertake risky lending". The two are not compatible and the banks will and should do what's in their own commercial best interests (and yes, that includes changes to bonus structures to avoid moral hazard issues) but taxing a banker more than any other profession is just not a viable option.

The UK never had the Glass-Steagall Act, that was in the US, was repealed in 1999 and saw the seperation between retail and commercial banks that had been enshrined in US law since 1933 end. It's what allowed them to start operating in the CDO market and hence gain exposure to subprime. What's little known, however, is that under US regulations, there are two types of asset that banks could keep on their balance sheet as "regulatory capital" - one is cash, and the other is mortgage-related securities so, guess what, they held both. Are you still sure it's all their fault???

Robert Davies - Socially Useful Activities

10:51 | 30 Aug 2009

Taxing socially useless activities is surely the way forward.

Why limit it only to bank transactions whose only aim is to make money.

Surely, Lord Turner could expand this concept to other activities.

What is the point of running round and round a track or 26 miles across London when there is a perfectly good public transport network. Think how much The Olympics could generate.

TV shows like Big Brother and East Enders are other obvious targets as is gambling, fishing, walking the dog and many more.

All we need is someone, preferably an ermined unelected Lord to tell us what is and what is not useful.

Have your say here:

Protected by FormShield