John Kay - A royal invitation to raise the debate on finance

A royal invitation to raise the debate on finance

We do need to increase the scope for structured and independent inquiry outside government, but with the kind of authority that only official status can confer.

The royal commission is a distinguished British tradition. Usually chaired by a judge, such an inquiry brings together a group of experts and representatives of competing interests. The commission is charged by the Queen to look into some broad issue of public concern.

The 1832 Royal Commission on the Poor Laws was a defining document of 19th-century economic and social history. Its most effective member, Edwin Chadwick, became one of the most influential men in Victorian Britain. Montagu Norman was the eccentric, even unbalanced, governor of the Bank of England during the Great Depression; his reputation never recovered from the incoherence of his explanations to the royal commission inquiring into the economic conditions of the time. When I was a student, parts of the reports of more recent commissions on taxation and the monetary system were required reading.

Lord Radcliffe was chairman of both these modern inquiries; and the best of such documents reveals the skills of a fine lawyer – the ability to extract and assess the relevant evidence, and the authority to require interest groups to present a compelling public rationale for their positions. That forensic skill and insistence on public accountability are required to take the reform of financial services forward. The public is angry, but bewildered and easily distracted by the complexity of financial activity, while the industry prefers lobbying behind the scenes to engagement in public debate.

The days of great royal commissions are probably over. We had one on financial services 30 years ago. Established after a Labour party conference voted to nationalise the banks (perhaps not such a stupid idea after all), the commission was chaired by the former prime minister Harold Wilson, sadly in the early stages of mental decline. The inquiry served its purpose: it enabled the Labour government to defer the issue until it was out of office, and its report is deservedly forgotten.

Lady Thatcher felt no need for commissions to tell her what should be done, and when her successors have established investigations they have structured them with a view to obtaining the results they want. Lord Hutton’s report on the presentation of material related to the Iraq war, which exonerated Tony Blair’s government and excoriated the BBC, did lasting damage to public confidence in inquiries.

But there is a continuing need for a means of publicly reviewing complex matters of general concern, at greater length than the three minutes available on Newsnight but more briefly than the 13 years of Lord Saville’s Bloody Sunday inquiry. Parliamentary select committees were established to fill this gap, and sometimes do. The Treasury select committee in the last parliament developed impressive expertise in banking issues through successive inquiries. But parliamentary committees have modest resources, and governments have been anxious to limit their challenge to executive authority. Too often, their activities are superficial, and emphasise partisan point-scoring over open-minded investigations.

We can manage very well indeed without inquiries designed to marshal evidence and bolster support for conclusions government ministers have already arrived at. Perhaps there are no longer great jurists with the capabilities, presence and public standing to lead royal commissions. We do, however, need to increase the scope for structured and independent inquiry outside government, but with the kind of authority that only official status can confer. Such inquiries should serve the traditional functions of informing and raising the level of public debate, of forcing interest groups to put their cards on the table, of ensuring proper consideration of genuinely difficult technical issues and of helping to mediate consensus on solutions.

Energy policy, taxation reform and public sector pension arrangements are good candidates for such analysis – as is the future of the financial services industry. The new British government’s proposal to use a commission to review that issue is one of the first credits on its record.

 

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