Nostalgia for Nolan: How to fix the city’s regulatory issues
“Ours is a broken regulatory system: a system where an endless procession of top officials from Whitehall to jobs in Prune City, and vice versa, makes it nearly impossible to curb blatant abuse.”
It’s groundhog day. Except instead of Bill Murray going through the same blizzard, almost identical stories of regulatory and political collusion regularly spill out of the newspapers. This testifies to the collapse of the standards of public life as they were. Indeed, what is the difference now between England and any other kleptocracy? Very little, except for an independent judiciary.
Just weeks after the PPE procurement process was exposed as “ an uneducating gold rush from cronies and chancellors, ” according to an MP, David Cameron turned out to have personally convinced the Chancellor to approve a Covid-19 loan for convict Greensill. Years ago, this could have been terminal for a government, and certainly for a chancellor. Today, it’s just another example of the hand-in-hand relationship between politicians, regulators and financial interests.
Ours is a broken regulatory system: a system where an endless procession of top officials from Whitehall to jobs in Prune City, and vice versa, makes it nearly impossible to curb blatant abuse. Shortly before Cameron’s news broke, for example, Andrew Bailey – the new Governor of the Bank of England – reportedly withheld evidence of a potential conflict of interest involving the Royal Bank of Scotland before assume his new functions at the Bank. This is not an isolated case. HM Treasury Mandarin David Hartnett developed a number of “ heart deals ” to allow multinationals to avoid tax before taking a job at Deloitte, while in the month before the publication of the Bailey conflict, Christopher Woolard left the FCA to take a job at EY. – the very firm which is potentially facing an investigation into its role in the collapse of Wirecard. This prank might be fun, if its effects weren’t so bad.
We understand why the revolving door could exist. We want our regulators to have first-hand experience of the industry they are supposed to regulate and to understand how restrictions are felt on the ground. After all, as Lord Salisbury once remarked, “a gram of experience is worth a ton of theory.”
This last point is instructive. Lord Salisbury was speaking following the introduction of a Civil Service Code which essentially prohibited conflicts of interest and sought to maintain probity in public life. These mores have remained for decades, finding a similar voice over the Nolan Principles which were introduced in 1995 in the wake of the “Cash for Questions” scandal. These seven principles include a number of provisions that would eliminate conflicts of interest – baggage and baggage – from the financial services industry if they were enshrined in law.
Would the absurdity involving Secretary of State for Health Matthew Hancock – who saw his family business be awarded a framework contract with the NHS in 2019 – would have happened if the Second Nolan Principle was legally enforceable? Obviously, that would not have been the case. After all, this principle emphasizes that actors in public life should not act or make decisions in order to obtain financial or other material benefits for themselves, their family or their friends. They must, in other words, declare and resolve all interests and relationships. Hancock is said to be on ear, while Bailey would likely not have been allowed to oversee the UK banking system.
Openness is also at the heart of Nolan’s principles. The second principle, for example, requires that public office holders act and make decisions in an open and transparent manner. How do WhatsApp messages from friendly publicans fit in? At the same time, information should not be withheld from the public, unless there are clear and legal reasons for doing so. In other words, could MPs have successfully voted to block the Greensill inquiry if these principles were legally enforceable?
Probity in public life matters, especially in the shadow of the global financial crash in which an entire generation has arguably grown up. Indeed, according to YouGov, 66% of adults in Britain do not trust banks to work in the best interests of society. In my opinion, the remaining 34% have a concussion. And while trust in a broken system is of course not fixed overnight, enshrining Nolan’s principles into law would be a start – but I don’t hold my breath.