Nick Robinson's Newslog

End of an era

• Nick
• 7 Oct 08, 09:10 PM

The City, for so long seen as the acme of Britain's bucaneering free enterprise island spirit, looks set to be part-nationalised or, if you prefer, to become a public/private partnership.

Thus will end the City of London's mesmerising hold on the political classes for the past two decades. A hold that began - to be more precise - on 27 October 1986. That was "Big Bang" day - the day Margaret Thatcher's government deregulated the financial markets.

I remember it well. It was the month I began working for the BBC and watched many of the brightest and best of my generation swap stories of the extraordinary starting salaries they'd been offered by the banks and the management consultancies. Ever since, the City has creamed off talent that was denied to industry, politics and public service.

As the City grew and grew, no-one with hopes of power - whether on the left or the right - dared question the supremacy of the Masters of the Universe. One of the first signs that New Labour were heading for power was their efforts to woo the City via their "prawn cocktail offensive".

There was no greater symbol of the Tories' decline than the fact that they were shunned by their former friends in the world of finance.

Labour and the Tories competed to attarct the support of the men in the banks and, yes, those popular villains in the hedge funds.

The City - by now a fifth of the entire British economy - became the cash cow that funded the expansion of the public services.

Politicians from Ken Livingstone and Gordon Brown on the left to Boris Johnson and David Cameron on the right boasted about London overtaking New York as the world's financial capital.

A political consensus grew up that it was best not to ask too many questions about spiralling debt, the mounting complexities of the derivatives market and, yes, those enormous bonuses.

In the next few days, leading politicians on all sides will insist that the City remains a cornerstone of the British economy; that they hope taxpayers will get their money back - as the Swedes did when they tried this in the early 1990s; and that this is a temporary and not a long term measure.

Nevertheless, nothing will be quite the same again.

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Decision time?

• Nick
• 7 Oct 08, 05:12 PM

The markets, the public and Parliament are all waiting to see what emerges from the 5pm meeting of the PM, the chancellor, the governor of the Bank of England and the chair of the Financial Services Authority. How they must wish they lived before the age of globalisation, rolling news and the web.

Gordon Brown is fond of recalling the story (told to him originally by Ed Balls) of a similar momentous moment in British economic history - the decision to devalue the pound - to illustrate how the pressures on politicians have changed. The Brown/Balls account turns like this:

On 29 July 1949, the cabinet met to decide that devaluation was necessary but did not act straight away because the Chancellor, Stafford Cripps, was convalescing in a Swiss sanatorium. The then Prime Minister, Clement Attlee, wrote a letter to Cripps and asked Harold Wilson, who was going on holiday nearby, to deliver it. Cripps told Wilson that no decision should be made until he returned to London. On his return, he spent a few days arguing unsuccessfully for delay. The cabinet confirmed its original decision on 29th August. The devaluation was not actually enacted until 18th September.

So, the 1949 devaluation decision took nearly two months. The 1967 devaluation decision took around three days. The 1992 decision to exit the ERM took just hours. If, and it is still an if, today's meeting decides anything on the same scale, the government will, in theory, have until first thing tomorrow morning to announce it - that's when the London Stock Exchange re-opens - but they'll have just minutes if they don't want any delay to impact on Wall Street or the Asian markets.

I say "if" because Downing Street insists that this is not an emergency meeting and was scheduled some days ago. We'll see...

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