Top positive review
27 of 28 people found this helpful
on 23 April 2010
Robert Peston asks a question he is unable to answer. This was certainly the case on Black Wednesday as Kenneth Clarke admitted in a television interview.On that occasion Peston's argument that decisions taken by an international super-rich stateless elite have unduly influenced policy and over-rode policy makers seems true. In so doing they have scooped a disproportional amount of the nation's wealth and the gap between rich and poor has increased no less under New Labour than under the Conservatives. What does emerge from Peston's coverage is that there are times when it is far from apparent whether anyone is running the country.
Peston identifies inefficiencies within the decision making system of which pensions is a good example. In 1997 Gordon Brown raided the pension funds of final salary schemes, removing tax credit on dividends. the reason behind Brown's policy was clear. He wanted to raise revenue to reduce the structural deficit in the public finances. Treasury officials expressed concern but Brown went ahead. The result was a decline in income to pensions funds over a five year period from £7.1 bn to £3.3.bn. Final salary schemes collapsed. Yet Brown's policy was the logical extension of Nigel Lawton's 1988 decision to limit the amount of surplus schemes could retain and of Norman Lamont's reduction in tax credits to pension schemes in 1993. Both were designed to raise revenue.
The political myopia demonstrated by politicians then became a farce with the introduction of stakeholder pensions. Theoretically designed to prevent alleged mis-selling and provide for the less wealthy, the stakeholder became a tax-free vehicle for the rich. Pensions minister, Ian McCartney, ignored unwelcome research statistics because they came from a Conservative David Willetts. Lord Turner, who headed the pensions commission, noted the response to Willetts was an exercise in damage limitation. He observed, "It is a classic example of how power works and the misuse of civil servants. The extent to which civil servants apply their intelligence to supporting their minister rather than actually thinking is quite distressing." Their ignorance of the real world was such that he wondered whether any of them ever read the Financial Times.
Peston deals with a variety of issues including the fund raising activities of Lord Levy, allegations of honours for sale - police investigation of which was hampered and harried by the political class. It spoke volumes when three of Blair's nominees for the House of Lords, all of whom had lend considerable sums to Labour, were rejected by the Appointments Commission. Other parties were also implicated. All those nominated claimed to be resident for tax purposes (or if not resident would make themselves resident) although a number failed to fulfil their promise and others who were resident made themselves non resident soon afterwards.
Peston describes precisely how the international financial crisis arose through excess lending against insecure assets and provides insight into how leverage was used to acquire, asset strip and sell off businesses. He discusses at length the careers of retailers Philip Green and Stuart Rose, neither of whom appear as attractive characters. They, along with Lord Levy, reinforce the old adage it's not what you know but who you know which counts. The trio are able to network with the richest members of society.
Peston is excellent on investment banks, hedge funds and how the super rich, encouraged by politicians, act in their own interest and with little or no control. Rather like the British kings who invited the Saxons for protection they have found their position undermined by people who have no allegiance to the country and pay no tax. The bonus culture remains indicative of their exclusive concern with their own wealth, short term gain at the expense of long term benefit and their open clash with the values of a property owning democracy. Peston believes concerted action is required to prevent the super rich from avoiding tax. Of course, that can only happen if the politicians are prepared to take on the public's concern and tackle the issues.
Peston's analysis that public services will continue to creak as more demands are made on it, while those who could contribute a sizeable amount to the national treasury do not do so is close to the truth. The only answer is to grasp the nettle of reform but doing so is likely to reduce opportunities for the present generation of politicians to move into well paid financial sector jobs when they leave Parliament. Peston's book is a must-read for anyone wanting to understand how the international financial system works. Five stars without question.