Wednesday, July 11, 2012

he who pays the piper calls the tune

Further to our previous post on the power of capitalists in the City of London, the Guardian also reports today on the financial companies influence in the House of Lords.

More than one in seven lords are in the pay of finance firms or have financial services clients, according to the register of members interests. Those 124 do not include members with unpaid advisory positions on financial companies or lobby groups.

 They also take a large number of seats on committees scrutinising issues vital to the City.Four of the 11 members of the Lords committee set up to consider the 2011 finance bill, for example, held positions in banks, and a fifth was about to join a bank. The Finance Act gave large tax breaks to businesses with offshore interests, including multinational banks and insurers. On the committee were Lord Griffiths, a Goldman Sachs director, Lord Hollick, a partner at private bank GP Bullhound, Lord MacGregor, who was at the time co-chairman of the UK food and agriculture advisory board of Rabobank International, and Lord McFall. Lady Noakes's appointment as a director of Royal Bank of Scotland was announced shortly after the committee reported. Other members in the pay of the finance sector included the late committee chairman, Lord Maples, who was also chairman of a venture capital trust and founder of one of the world's largest offshore law firms, Maples and Calder, and Lord Wakeham, adviser to LEK Consulting, a firm with a large client base in the financial services industry. This gave lords who were paid by the finance sector an overwhelming majority on the committee. Paul Moore, the former HBOS executive who was sacked after warning about the bank's risky sales culture, said: "If you have five people with potential conflicts of interest it is extremely difficult to see how justice can be seen to be done."

Swiss bank UBS is among the best-connected City institutions with three Conservative peers on its payroll: Lord Brittan of Spennithorne, who is its vice-chairman; Lord Garel-Jones, who is managing director; and Lord Waldegrave of North Hill, who is registered as an adviser.

In 2010 Lord McFall, until then the Treasury select committee's longstanding "chief inquisitor", became a non-executive director of NBNK Investments, a new bank set up to bid for assets from nationalised banks. Last month it was announced the bank would close. The peer has also become a paid senior adviser to KPMG on regulation and corporate governance and an unpaid member of the advisory council of powerful finance lobby outfit, TheCityUK. McFall was quoted last year saying that "politicians are weaker than the financial industry". They needed more "authority and independence" if they were going to be successful in imposing tougher regulation on banks" he said.

 The Financial Services Authority is meant to be the City's watchdog but internal documents reveal it has secretly co-ordinated high-level lobbying strategies with the industry it is supposed to police. The documents come from previously restricted minutes of meetings between the FSA and 13 powerful financial industry trade bodies, including the British Bankers Association (BBA) and the Association of Financial Markets in Europe. The authority agreed on a co-ordinated effort to influence UK regulatory reforms, including opposition to plans of the business secretary, Vince Cable, for a new super-watchdog that would crack down on corporate governance abuse. The FSA discussed blocking new European rules to bring transparency to commodity markets through the European Securities and Markets Authority's commodities task force. The authority discussed the best time for the industry to start lobbying on new EU financial transparency and investor protection rules via the directive known as markets in financial instruments (Mifid). It advised that "industry should engage as early as possible and at all levels".

The Treasury select committee member John Mann declared "The regulator and its head, Lord Turner, have paid lip service to their designated role of regulating the industry.. Instead, they have seen regulation as a negotiated partnership, where cosy deals are reached and where it is hard to see who is the poacher and who the gamekeeper."

The big four accountancy firms donated £1.9m in services to political parties since 2009. Deloitte, Ernst & Young, KPMG and PwC seconded staff free of charge to the main political parties. Labour MP Austin Mitchell described the big four as being "more powerful than government". He said the companies' financial success allowed them privileged access to government policymakers. "They are the only ones who can afford to offer staff for secondment," he said. Employees from the big four have been sent to work with MPs, political party offices and government departments. In March 2011 a report by the House of Lords economic affairs committee criticised the big four's "oligopoly", suggesting their "dereliction of duty" contributed to the financial crisis and the downfall of Northern Rock. The announcement did nothing to stop political parties from accepting assistance from these companies.

Capitalists influence on decision making is large and pervasive: there are 26 industry bodies and 38 public affairs organisations. The £93m lobbying budget quoted by the Bureau of Investigative Journalism is an understatement: it leaves off conferences, thinktank funding and much of the entertainment and free lunches that goes into buttering up powerbrokers. It is their pay, their say, their way.

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