STUC calls for Scotland’s politicians to raise their game
18th September 2008
Speaking as the economic situation grows more uncertain by the day, Stephen Boyd, STUC Assistant Secretary said:
“The response of politicians to the challenges currently facing the Scottish economy has, to date, been wholly inadequate.
“It is encouraging that the Prime Minister is now considering proposals to end irresponsible behaviour in the markets but any new intervention will come far too late in the day. The Prime Minister and his Labour colleagues in the Scottish Parliament must now fundamentally reappraise their vision for the Scottish economy. The complacent belief that financial services will forevermore drive growth has been blown apart.
“Whilst the First Minister’s vilification of speculators is welcome, the SNP has failed to outline coherent plans for regulation of financial services in an independent Scotland. The First Minister’s views must be balanced against those of his party which has consistently promoted the light-touch, under-funded Irish model as a regulatory exemplar for an independent Scotland. The SNP cannot have it all ways: too often the First Minister slips into economic populist mode as his Ministers tour the country promoting laissez faire.
“In light of David Cameron’s statement that ‘we must not let the left use this as an excuse to wreck an important part of the British and world economy’, Annabel Goldie should explain exactly what she believes will constitute effective regulation of the financial sector. Very few people will have any confidence whatsoever that the Tories will prioritise the interests of working people over those of their friends in the City.
“The recent supply-side silliness of the Scottish Lib Dems hardly warrants a mention”.
ENDS
Notes
David Cameron’s comments above were reported in today’s Financial Times. The STUC will publish a major discussion paper on the current economic situation on 8 October 2008; the date of the next meeting of the National Economic Forum.
STUC on Lloyds TSB’s takeover of HBOS
18th September 2008
Commenting in the wake of Lloyds TSB’s takeover of HBOS, Stephen Boyd, Scottish Trades Union Congress (STUC) Assistant Secretary said:
“Scotland’s First Minister was correct to attack the ‘spivs and speculators’ who targeted HBOS and undoubtedly accelerated the steep drop in its share price. However, HBOS Executives are hardly blameless. It wasn’t the spivs who left the Bank over exposed to commercial property and sub-prime debt or too reliant on the wholesale markets.
“Once again it is the ordinary worker who is left to carry the can. As the great unravelling of financial markets continues, staff facing sudden and harsh redundancy will rightly be appalled as they witness the ‘masters of the universe’ easing into gold plated retirement.
“We urgently require a fundamental reappraisal of both the regulation of financial services and the place of financial services within the wider economy”.
ENDS
Letter to the Herald
20th September 2008
Scotland’s First Minister was correct to attack the ‘spivs and speculators’ who targeted HBOS; accelerating the steep drop in its share price and pre-empting its takeover by Lloyds TSB. However, HBOS Executives are hardly blameless. It wasn’t the spivs who left the Bank exposed to commercial property and sub-prime debt or too reliant on the wholesale markets.
The failure of regulators to prevent short-selling is but the latest manifestation of the light touch regime which has received strong support across the main political parties. As the First Minister slips into economic populist mode his Ministers continue to tour the country promoting laissez faire. The Prime Minister has prioritises ‘innovation’ in financial services at the expense of patient growth in the productive sector.
And once again it is the ordinary worker who is left to carry the can for the failures of executives, regulators and politicians. As the great unraveling of financial markets continues, staff facing the stark consequences of sudden redundancy will rightly be appalled as they witness the ‘masters of the universe’ easing into new jobs or gold-plated retirement.
We now require nothingless than a fundamental reappraisal of both the regulation of financial services and the place of financial services in the wider economy. The complacent belief that the ‘innovation’ generated by a lightly regulated financial sector is a sustainable motor of growth has been blown apart.
Stephen Boyd
Assistant Secretary
Scottish Trades Union Congress
STUC Briefing for MSPs
Wednesday 24 September 2008
The Financial Crisis
Download a copy of the briefing in pdf format
In responding to the crisis in financial markets over the past week, the STUC has argued that:
· the ‘financialised’ economic model pursued with particular vigour by the US and Britain is now dead in the water;
· financial markets require more effective regulation as a matter of urgency;
· more effective regulation is only part of the story. The economy must be rebalanced – the ‘financialised’ model which exaggerated and skewed the role of financial services was never sustainable; built as it was on rapidly expanding household debt-income ratios and corporate debt-equity ratios. Policy should now emphasise stabilising and growing manufacturing investment and employment;
· events of the past week have only served to highlight the vacuity of the anti-government crusaders on the fringes of Scottish politics and media. The free-market economy is a myth. Regulation is a public good. Efficient economies require appropriate Government oversight and intervention; and,
· With the end of the unsustainable ‘financialised’ economy, there now exists an opportunity to build a society where the fruits of sustainable economic growth are broadly shared with those who create that growth each day of their working lives. To do this it will be necessary to create an economic architecture that reconnects a strong, flexible economy to the living standards of all, not just to residents of the penthouse.
HBOS
The proposed Lloyds TSB takeover of HBOS is the inevitable consequence of regulatory and management failures. ‘Spivs’ may have accelerated the demise of HBOS as an independent company but there is no escaping the management failures that invited the speculative activity; management failures that are in themselves a function of lax regulation and the reward mechanisms blighting the UK’s model of shareholder capitalism.
This assessment is not to underestimate the potential threat to jobs and the loss of a major Scottish headquartered institution.
Action
The demise of an independent HBOS and the financial crisis are inextricably interlinked. We now require a coherent and consistent response from Government.
HBOS
The Scottish Government must:
· press upon Lloyds TSB’s Board and senior executives the importance of immediate and comprehensive engagement with the recognised trade unions. It is imperative that the workforce is fully informed and consulted as the takeover proceeds; and,
· maintain the alliance with civic Scotland to ensure that pressure is brought to bear to retain jobs and HQ functions in Scotland – as a minimum, there should be no compulsory redundancies.
Regulation of finance
An economy based on deregulation of markets, asset price bubbles and consumption fuelled by prodigious levels of debt was never sustainable. The STUC has pointed this out relentlessly but Government at all levels (Scotland and UK) was not prepared to listen.
· Regulation is a reserved matter but all politicians can play a role in changing the prevailing business culture – a very clear signal should be sent to the markets that the reckless behaviour that became endemic over the last decade will no longer be tolerated.
At UK level, Government and regulators must act to effectively regulate the markets. Priority should be given to:
· reducing the risk from executive reward mechanisms which incentivise reckless behaviour; and,
· effectively regulating the securities market. Far from improving stability through risk-dispersal, securitisation only served to globalise the consequences of reckless lending in specific markets. All financial securities should now be traded in licensed exchanges by organisations whose accounts are subject to regular inspection.
Rebalancing the economy
Finance should support the wider economy, not destabilise it. Despite light touch regulation, the UK financial sector has become no better at supporting the productive sector. The share of domestic lending going to manufacturing declined from 5.2% in 1999 to 2.3% in 2007. Therefore, the Scottish Government should:
· establish a Scottish Investment Bank to provide patient, committed long-term capital to growing Scottish companies; and,
· working with stakeholders and using all the levers available to it, design and implement a modern industrial strategy for Scotland.
Council of Economic Advisers
The STUC is not remotely surprised that George Mathewson, Chair of the CoEA is also Chair of a hedge fund and that the fund engages in short-selling. The STUC supported the principal of a CoEA based on the US Federal model and could see no reason whatsoever for inviting business people to participate. The Chair’s credibility disappeared during his first appearance before the Economy Committee when he argued that the main issue facing businesses in Scotland was an over-regulated labour market - thereby ignoring massive international evidence to the contrary.
· The First Minister should act to ensure that the CoEA begins to interact with stakeholders in the economy – he should use the Bank of England as a model. The BoE’s Agent in Scotland ensures that MPC members have access to the full range of views across the country.
Powers of the Parliament
· The HBOS situation and wider financial crisis raise serious questions about regulation, ownership and control and the role of Government and central banks. Both the National Conversation and Calman Commission need to engage with these issues as a matter of urgency. It is incumbent on all parties to develop and articulate consistent plans for the regulation of banking and finance in Scotland.
STUC
September 2008
STUC on Banking Rescue Package and Interest rate cut
8 October 2008
Speaking after the Chancellor had announced details of the banking rescue package and the Prime Minister had confirmed that the Bank of England will cut interest rates by half a percentage point, Grahame Smith, Scottish Trades Union Congress (STUC) General Secretary said:
“The decisive action announced today through the banking rescue package should make a significant contribution towards the restoration of stability.
“The cut in interest rates was the very minimum the STUC was looking for at this stage. We strongly suspect that a full percentage point cut may be required next month as today’s action is unlikely to prevent the economy moving into recession.
“Today’s announcements mark the end of the unsustainable ‘financialised’ economic model. We urgently require a fundamental reappraisal of both the regulation of financial services and the place of financial services within the wider economy.
“Today’s events also highlight the fundamental role of government in a modern dynamic economy; a role that has been consistently decried by too many in the business community over a number of years.
“Indeed, one of the most repellent aspects of the unfolding crisis has been the interventions of senior Scottish business representatives castigating the government for a perceived slowness to act. The arrogance and hypocrisy is truly breathtaking. Having spent 3 decades cautioning against anything that smacks of intervention or regulation, they now complain that government has been to slow to act to save the banks from the consequences of their own recklessness.
“Government is complicit in the current crisis in so far as it created and sustained the lax regulatory regime that facilitated reckless behaviour. In doing so, it was simply acceding to the demands of business.”
ENDS
STUC on implementation of Bank rescue plan
13 October 2008
Commenting after the Treasury announced details of the rescue plan’s implementation, Grahame Smith, Scottish Trades Union Congress (STUC) General Secretary said:
“The set of commitments agreed between Government and the Banks should improve stability and fundamentally change the way Banks operate in the UK. Given the scale of taxpayer exposure, the commitments on remuneration and dividend policy were essential. The commitment to return lending to small businesses and homeowners to 2007 levels is particularly important if the UK is to avoid a deep and prolonged recession.
“This partial nationalisation must mark the end of the era of banking irresponsibility. Those now being rescued by the public purse were amongst the most vocal advocates of a minimalist role for Government in the economy. Today’s humiliation should lead to an extended period of reflection amongst the anti-government crusaders”.
ENDS
