I have watched, waited, searched and searched again for signs that our three main political parties are looking for answers to some of the key issues surrounding the future of the financial services sector. My wait appears to have been just about in vain.Sure, there was lots of bluster about bankers' bonuses at the Labour and Liberal Democrat conferences but this barely amounted to more than cheap headline grabbing and beyond some pretty obvious proposals about linking bankers' remuneration to longer term performance, they barely scratched the surface of that debate.
I had expected the main parties to stake out some distinctive territory on at least two of the key issues that loom large as a result of the financial crises of the last two years and last autumn's cataclysmic events in particular.
The first is the failure of elaborate systems of regulation to predict, prevent or adequately respond to the crises. There is a fierce debate raging around the world about how we can regulate the financial services sector better. It has been on the agenda at the last two G20 Summits world leaders consider it that important. Yet, it seemed to find no place on the agendas of the party conferences at least, that is, until it belatedly got a mention in David Cameron's speech to the Conservative Party conference yesterday. He slipped in a brief mention of the Tories' plans to transfer the main regulatory burden to the Bank of England, condemning Labour's no change stance on the way. We are still in the dark over exactly how the Financial Services Authority will be split up between the Bank of England and the proposed Consumer Protection Agency but at least we know it is still on their agenda.
The other issue the next government will not be able to duck is what to do with the state owned financial institutions, yet no-one seemed prepared to address this. Part of the public anger over bankers' bonuses is the lack of understanding of the difference between ownership and control. The government has tried to separate the two, taking ownership but choosing not to exercise control: the public believes control follows ownership as night follows day.
This is an area where there is an opportunity for creative policymaking, not least when you consider how to tackle the challenge of returning some of these state owned assets to the private sector - which the next government will have to start doing at sometime. Just consider some of the options: the state could take control and use that to create new forms of socially useful financial products (if you follow Lord Turner's analysis), it could break them up to set the banking sector on a path away from the "too big to fail" destination we seem to have reached in the last decade, it could insist on new forms of ownership (based on mutuality) as they are de-nationalised or it could go for high profile privatisations just designed to pour money back into the public purse. You can see quickly the potential for staking out distinctive political territory with policies of real substance.
It will be impossible for the parties to continue to ignore these issues as we go into 2010 and they start drawing up their election manifestoes. It seems a shame that they all missed the opportunity to start a genuine debate during the party conference season.
