Close But Will It Float?

We get the politicos we deserve, of that I have become increasingly assured over the years. In this past week we have had more sleaze over expenses, Gordon Brown riding the waves of recession on his white (elephant) charger and a little known MEP doing his own stand-up routine in the European Parliament and breaking all you tube viewing figures in the process.

Whilst all this was going on David Cameron made a speech at the Stock Exchange, which, to use an old Labour party idea, seemed to benefit from taking place when it was a good day to bury bad news. It wasn't that what he said was bad news in itself but the fact that it opened up more questions than answers.

The Conservative Party have long believed that less legislation is the way foward and that businesses shouldn't have to pay for red tape simply because it means a few thousand more public sector jobs can be created. What DC did on Tuesday night however was to set the good ship Conservatism on a collision course with the FSA iceberg.

The idea of returning the duties of the FSA to the Bank of England is of course something most, if not all, businesses would agree to. The cost of belonging to a club that has failed in its aims far outweighs any benefits to most organisations and the fact that the BOE managed to marshall the economy for so long with relatively few problems is one of the more convincing arguments for the return of power to its rightful home. The problem is that the 800 odd people who work within the FSA used to work at the BOE and you do wonder whether having once been let of the leash they would like to go back to the old lady and work there again.

Cameron's speech came on the same day as the FSA chairman, Lord Turner, argued for the existing financial regulator to retain the lead, it also came on the day that the Governor of the BOE warned, that in his opinion, 'We cannot afford any more stimulus plans.'

Cameron's words were almost Churchillian as he argued that the, "The Bank of England will be back and we will restore its role in controlling the levels of debt in the economy." The supervision of banks was split in July 1997 between the Bank, the FSA and the Treasury under what has become known as the tripartite structure. Cameron added, "The tripartite system monumentally failed its first big test," in reference to the collapse of the bank Northern Rock, which was nationalised last year.

Mervyn King, the Governor of the Bank of England, argued that the Bank of England had been limited in its ability to address the economic meltdown by having no tools beyond interest rates, and the single goal of keeping inflation constant. The Bank had only obtained the access to information it needed on individual lenders once they became distressed and it moved into its role as their lender of last resort, he said yesterday.

The Conservative Party face a wider dilemma if they are to transfer the powers of the FSA back to their spiritual and rightful home, at what point does good legilsation become bad legislation? When should a party, that believes in the power of the free market and the right of the indvidual to puruse his own ideological path, step in and say, actually you should do it this way. An ideal Government should be like a good parent, advising the child of the options available without the need to stand behind the child every minute of the day saying, "you don't want to do that!"