Sunday Telegraph article: Complacent, unelected bureaucrats are the ultimate enemies of economic growth

The following article was first published in the Sunday Telegraph 

The scandal surrounding the decision by Coutts to terminate Nigel Farage’s access to his bank account, apparently because of his political views, has shone a light on a damaging culture that has taken hold across the West.

I was appalled that a customer of a bank should have been treated in such a way. Heads have rightly rolled. But we should not assume that this problem is limited to the financial-services sector.

What has happened at NatWest is a microcosm of what has gone wrong both in the boardrooms and the treasuries across many Western economies. The saga shows how a powerful technocracy presides over an increasingly opaque system, while elected politicians – in particular those politicians whose views do not find favour at London dinner parties – are treated with suspicion.

The current regulatory system views banking as a problem to manage, rather than an enabler of growth. And wider corporate culture is disregarding concerns about living standards and the economy.

We enjoyed healthy economic growth during the latter half of the 20th century, but this led to a sense of complacency that kicked in during the 1990s. Growth was surely a given, regardless of the level of regulation or taxation. It was taken for granted.

By the 2000s, a new culture was creeping into both business and government, with the arrival of new regulators and the emergence of environmental, social and corporate-governance policies – the so-called ESG agenda. As with all red tape, these regulations and reporting requirements benefited big players by making it harder for small businesses and new entrants to compete. Those who did well in corporates were the ones who were good at mouthing the latest platitude.

Two decades later, and businesses are being suffocated by the regulatory burden. For all the occasional talk of a bonfire of red tape, no one seems ever to have lit the touch paper.

But while we can lay blame at government’s door, businesses are not absolved from it. Left-leaning thinking may suffuse our state institutions, but increasingly we are seeing Left-wing ideology and cultural obsessions take hold of big, corporate businesses.

Extraordinarily, the desire to be seen to be pursuing a supposedly “progressive” agenda now seems to be trumping those businesses’ commercial interests. It is little wonder that so many Western countries are stagnating when significant elements of what should be the most productive part of the economy – the private sector – are so often pursuing actively unproductive, or even self-harming, policies. A breeding ground has been created for precisely the sort of behaviour that we have observed from the NatWest Group in recent days.

In corporate circles, there is no question that there is a snobbery which mocks and dismisses out of hand those who hold certain views that are deemed unacceptable – whether on Brexit, immigration or climate change.

They ignore the fact that those views are held by millions of hard-working Britons, people who have thrown their support behind Nigel Farage in substantial numbers.

Doubtless, the new information that recent events have brought to light will inform people’s decisions on where to take their banking business in future. But should we be entirely surprised that NatWest Group’s management has seemed to be oblivious to the interests of their hitherto loyal customers and more focused on their relationship with the regulators?

Lest we forget, a full 14 years after the financial crisis, the Government still holds nearly 40 per cent of the shares in NatWest. Many people are rightly wondering why this is still the case and how much longer they can be expected to put up with it.

It is also now clear that the structure of banking regulation has become too complicated. A micro-managing approach has been widely adopted at the Treasury and the Financial Conduct Authority. Legislation has created endless box-ticking and demands that stacks of paperwork be filled in, such as the notorious “Know Your Customer” checks. This makes it harder to see the big picture.

Other vital sectors for the economy, such as energy and transport, have to navigate a similar regulatory landscape. It is far too complex, with too much regulation focusing on minor details at the expense of overarching issues like energy independence.

That so much decision-making has been outsourced to unelected and unaccountable bodies and regulators has become a curse. Across the entire gamut of government departments, the default setting of agencies and quangos is to accrue power.

When the British public voted for Brexit to take back control from Brussels, they didn’t expect all the same powers to be handed to Whitehall bureaucrats as unaccountable as their counterparts in the European Commission.

Yet that is exactly what has occurred. The consequences have been dire: dampened competitiveness across crucial industries, including financial services, energy and transport. High barriers to entry for potential disruptors.

Startups and innovators too often find it difficult to secure finance and get the right bank account, despite the vital role this plays in their survival. Again, this is the result of cumbersome regulations. And the damage wrought by a stifling mix of red tape and taxes extends far beyond the stunted growth of home-grown businesses: it is damaging our competitiveness internationally, too.

Big companies are preparing to leave Canary Wharf, in London. Others are opting not to list in the UK at all – not least given the recent hike in corporation tax to 25 per cent.

It is with some irony that we learn how, at the same time as a complex web of technocracy accumulates more power, politicians are struggling to get a bank account. A difficult situation was significantly worsened by the introduction of the 2017 Money Laundering Regulations.

These transposed into UK law the EU’s Fourth Anti-Money Laundering Directive, ramping up the focus on those of us labelled “Politically Exposed Persons”, defining MPs and others involved in public life as “enhanced risks”.

In law, it makes elected representatives automatically subject to added suspicion. It serves as yet another example of legacy EU law that is still on the UK statute book, years after our departure from the bloc, and which is restricting the room for manoeuvre for men, women and businesses up and down the country.

It’s hard enough already to attract good people to enter national or local politics in an era characterised by toxic Twitter pile-ons and the constant questioning of motives by a cynical media. Throw in the difficulty of securing a mortgage or opening a new bank account to the job description, and how many potential, aspiring candidates will want to throw their hats in the ring?

We can ill afford the twin problems of poor regulation and a misguided corporate culture at a time of low growth. When the economy desperately needs a shot in the arm, the last thing we need is to have corporations incentivised to behave as champions of “social purpose”. Firms need to recall their core purpose: to serve customers and make money.

Competition is the ultimate regulator of economic activity. It is competition that allows customers to hold their suppliers to account and to be able to go elsewhere easily if they don’t like the service they are getting. Of course, there is a role to be played by the Government in preventing cartels or monopolies from developing. But its current approach has meant opportunities for new, nimble entrants into various markets are being cut off.

Let’s have companies that provide services and make money. Let’s have regulators that drive competition. And let’s leave the politics to the politicians.

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