Thursday, 12 July 2012

Balancing Act: The future of British Banking



There have been so many scandals over the last few years that it is difficult to remember which came first: Politician’s expenses, then phone hacking, then LIBOR? Or does the new LIBOR scandal technically come first, since British banks have been found guilty of manipulating a key financial rate since back in the noughties? (Pun intended.) Just when Bob Diamond’s statement that the ‘period of shame for British banking needed to be ended’ couldn’t get any more infamous, it emerged that the banks had been guilty of pushing unnecessary financial products onto small business (who then went bankrupt), and now this. The British public have a right to be outraged; anyone observing from outside the country may be forgiven for thinking that this island, normally a bastion of law and order and ‘gentlemanly capitalism’ has suffered a severe case of moral decay. The debate has significant moral implications but is imposing regulation on the banks the right thing to do?

To backtrack slightly, LIBOR (London interbank offered rate) is essentially the rate that determines how much it costs banks to borrow money from the markets, and it underpins a market worth £350trillion. Since it is made of estimates from eighteen banks in London, it can technically be fiddled, although the system discounts the highest and lowest figures and takes an average of the rest. The scandal itself can then be separated into two parts. Firstly, during the boom years, Barclays (and possibly twenty other banks being investigated internationally), manipulated the rate by working with one another to drive it up when it was good for business. Secondly, after the crash, Barclays was found to be deliberately estimating a lower rate in order to make their business look stronger. This distinction is important to make: During the first period the manipulation was done to maximise profit, and could therefore be “the biggest securities fraud in history” (The Economist). However the second period is more morally complicated.

Since the crash, every person in the UK has forked out £19,000 to support the banks. The prosperity of them is, to some extent, in our self-interest. Barclays in this case massaged the rate to make the bank appear stronger and therefore save the taxpayer. And thus we come to the role of the Bank of England and the politicians. An on-going evolution of the scandal has occurred since Bob Diamond claimed that he had the tacit consent of the Bank of England and regulators to manipulate the rate. In the aftermath of the financial crash of course, politicians were desperate to keep credit flowing and the industry afloat.

The government seems caught between a rock and a hard place: On the one hand, if they choose to enact a ‘witch hunt’ against the bankers and bring in constricting regulation, Britain could lose its most dynamic industry, the only industry in which Britain is truly a world leader. Competition from Hong Kong, Mumbai and Dubai should be taken seriously.  On the other hand if they let them get away with it, the public will be outraged, and more than ever the government and the banking elite will be seen as sleeping in the same bed. This is especially so after the Bureau of Investigative Journalism this month revealed that the City has spent £92million on political lobbying alone in 2011. This has led to such policy successes as the slashing of UK corporation tax and taxes on banks' overseas subsidiaries, and neutering of a national not-for-profit pension scheme launching in October that was supposed to benefit millions of low-paid and temporary workers. (The Guardian)
Moreover, the government’s future policy will also be framed against the 2011 riots, an occurrence that has largely been swept under the carpet in the year since. Exemplary of the heavy-handed response was the sentencing of a student with no previous convictions to six months in prison, for the theft of a £3.50 bottle of drink. (The Week.) Any non-action against bankers will be juxtaposed against such extreme measures against the less well off. Indeed, a strong argument can made to link the financial crisis, caused by irresponsible banks, with the frustration and disenfranchisement felt by many poorer young people that spilled over last summer.  An even broader suggestion would be that Britain’s financial sector has been the driving force behind the long-term stratification of this country.
The banker’s argument, that Britain is dependent on the industry’s prosperity, is to some extent true. But would the industry really suffer such a blow if regulation was brought in? The Observer has remarked that endemic corruption will only end when bankers know they are likely to get caught and face stiff penalties – mere condemnation and calls for a change in culture won’t cut it. Across the pond, American law firms are lining up to represent clients from multinationals to Baltimore City council, who say they have lost money as a result of banking manipulation. Here, the Financial Services Authority (FSA), the watchdog accused of turning a blind eye to LIBOR fixing, has disingenuously stated that no one has any lost money.

Bagehot in The Economist has reasoned against a public enquiry: “Public anger which vents itself on individuals and moves swiftly on does nothing to make the system work better; and, if the pendulum swings too far, it may endanger the country in the long run.” Nevertheless, something substantial needs to be done. Whether it is through a judicial inquiry or parliamentary investigation, there needs to be a significant overhaul of the structure of British banking. They are essential to our prosperity, yet act increasingly antisocially. Most of all it is for British morality and justice that our financial sector needs to be reformed.

Just as the press is being held to account for its actions, and regulation reformed, so too the financial sector needs to face serious penalties: Without more regulation there is simply too big an incentive to cheat and manipulate, and there is no reason to suggest that a more responsible and regulated sector could not still compete globally. I for one am glad that these scandals keep occurring, for they seem to be the most effective way to muster public support in favour of change.

Friday, 6 July 2012

Gove's Reforms: A Blast from the Past




Michael Gove’s well publicised recent Education reforms which call for a return to a two-tier secondary qualification, akin to the old O level/CSE system, came as a surprise to many, not least to the Deputy Prime Minister Nick Clegg.

Not only is this yet another clear example of the increasingly ‘behind close doors’ attitude that has engulfed Britain’s governance since the advent of the coalition, it is also one of the most controversial policies. Mr. Clegg has suggested he will vote against the propositions simply because ‘he was not consulted’ (roaring passionately as he throws his toys from the pram). Cameron for his part has now, fairly limply it must be said, got behind the proposals, but Gove has since been forced to retract somewhat and pull his neck in, lest he be beaten to death by Lib Dem cabinet members with what remains of their 2010 election manifestos.

So what of the remaining proposals themselves? Most notable amongst them is a move towards a single exam board that will set standardised, cross-the-board papers, in an attempt to enact a more rigorous approach to examinations. Moreover, there will be no more re-sits, except in the key disciplines of English and Maths. Whilst I do agree with Mr. Gove that British education is in dire need of reform, I also firmly believe that this is not the way to do it. Mr . Gove wants to build an education system for the future, to compete with the likes of Singapore, France and the USA; as the White Paper of April this year argues. However, these proposals are anchored in the past. If Britain wants an education system of the future (presumably to build an economy of the future), the past is not the place to find it.

We have already entered a new age in how we communicate, work, play and interact. This is the information age and in the information age, the enlightenment notion that knowledge is power is becoming ever less important, whilst understanding is becoming increasingly so. We continue to persevere with the industrial revolution’s model of education, born out of the values of the enlightenment. This system is founded on principles of education for the masses; but what this has led us to in the 21st century is a lowest common denominator structure. Schools are run like factories; children are sculpted and taught to in the same way, treated as a batch and not an individual. As any teacher worth their salt will tell you, what works for one child will not work for another. Furthermore, why should Britain aspire to be like any other country in its education system? What is right for the children of Singapore may not be right for the children of Britain. If Mr. Gove wants to start building education reform we need to be progressive not regressive, leaders not followers and we need to think differently about what we think will best benefit our children and our society as a whole.

What I mean by this is that principles of creative, divergent thinking are what need to be taught to our children. Ironically, these are the very same principles which Mr. Gove has failed to apply to his own education reforms. An approach centered on children being encouraged into a culture of learning, of interaction, of modern skills and of personal discovery that can take them out into the world with a desire to learn, create, collaborate and improve. A lecture given by Sir Ken Robinson to TED followers ‘Changing the Education Paradigm’ rather neatly sums up this sentiment: That we need to think differently about how we educate our children if we want to move forward and Michael Gove’s proposals would certainly be a step backwards.

I will use myself as an example, I have just graduated from a Russell Group university with a degree in Politics & Philosophy. My degree result and previous application to my subject has been good enough for me to be offered a place to study for a Masters at that same institution. However, this educational success has not always the case. I finished college with reasonable A-Levels but decided late on that I didn’t want to take the university course to which I had applied (Sports Science).The ability to do re-sits allowed me to improve my grades enough to get into a higher standard of university and to subsequently to excel within that environment. This is a classic example of children maturing at different ages academically. At 19 I was among the least qualified of the students entering the course, but by the age of 21 I had developed enough to stand out within the right environment. Any education system needs to give young people every opportunity to succeed in this way, not penalise them and create a culture of failure because they are not at the same level as their peers at any given age in mental arithmetic or their ability to remember the names of the Tudor kings and queens.

Education is undoubtedly in need of reform and indeed always will be. The world changes at such a rapid pace that we need to be prepared to be constantly flexible in all our institutions to adapt and survive. If we cannot achieve this then they will fall into disrepair and generations of children will be failed. To achieve these reforms by reverting to an archaic method that simply closes down children’s options before they could even understand what they are seems unjust. Education needs change and it needs both imagination and creativity to help us to achieve this, not simply a reversion to antiquated, anecdotal notions of previous excellence. We have to reassess the most basic principles on which our model of education stands, the things that we take for granted, standardised testing, class sizes, methods of teaching, what we are actually teaching if we wish to move towards a brighter, more educated future.

J.P. CHESHIRE

Tuesday, 3 July 2012

New music film: Natalie Squance

This short film features Natalie Squance, a Leicester based singer songwriter, providing an insight into her music and the person behind it. Today it seems that there are more aspiring singer songwriters than ever, which makes it even more rare to find one that holds something unique and captivating. Natalie is most definitely part of the minority that stands out with her refreshing blend of effortless vocals and melodic narratives. Her excellent guitar playing allows her songs to flow, often unconventionally, working synonymously with her vocals. Natalie's songs possess an 'English' and fictional quality to them that perhaps stems from her fascination with old nursery rhymes and other such tales. The film shows Natalie at her house and then at Foxton Locks, a place she visited frequently as a child. It also features two live performances of 'Down the Telephone Wire' and 'Taking Tea', the latter can be found on her new d├ębut album 'In The Apple Tree' (2011).

For the full video, see: http://vimeo.com/43290980


Find Natalie's album at: http://natalie-squance.bandcamp.com

Ed Wirgman is an aspiring film maker from Winchester.