Don’t trash the planet, our collective security, or individual lives
I began my reflections on the financial services bill – the law that aims to set out the new framework for the City post-Brexit – with a small briefing from MacMillan Cancer Research (MCR). It called for an amendment to the bill requiring organisations to have a statutory duty of care for customers.
The charity suggests this is the best way to ensure that financial services providers take a pre-emptive approach to ensure they act in the best interests of their customers. As you might expect, Macmillan focuses on the financial difficulties of people with cancer, but also notes that the Financial Conduct Authority (FCA) believes one in two people will become vulnerable at some time in their lives.
But I would go a lot further than Macmillan. In a complex, fast-changing world, overloaded with pressures on time and attention, with so many stressed by the struggle for mere survival and the fear of insecurity, the sensible approach is for everyone to be treated as vulnerable – to acknowledge that our whole society is acutely vulnerable.
Create a system that works for the most vulnerable and that will be the one that works – most securely, resiliently and safely – for everyone. And we know that our current system is not working for many at the individual level – just look for a practical, topical example at the disastrous performance of our insurance sector when it came to business interruption insurance for small businesses under Covid-19.
But beyond that, the financial sector is utterly failing at the structural level to meet the collective needs of our whole society, which is acutely vulnerable, as the Covid-19 pandemic has shown us to be. A system that works best for everyone would be a financial sector that is a utility – a provision of essential services for the real economy, the economy that feeds us, builds our shelter, clothes us and provides the other essentials of life.
Instead, what we have following decades of financialisation, of everything from the care sector to the so-called water ‘industry’, is a parasitic financial sector sucking funds out of the real economy and all too often off into tax havens, loading essential provisions and services with unsustainable debt. And if you think I’m being radical here, I’d invite you to read the Financial Times’ extensive coverage of the impact of financial engineering of the water companies.
We are more than a dozen years on from the 2008 financial crash, when the cash machines very nearly stopped working – and in the age of Covid-19, we are surely more aware of the need for resilience and stability. Yet I note that an Oxford University Faculty of Law conference held in 2018 on financial regulation concluded that “we are safer but not as safe as we could and should be”. And that was just thinking in the financial sector’s own terms.
As Lord Agnew of Oulton introduced the bill, we heard quite a bit about limiting risk, but I did not hear the words ‘climate’ or ‘nature’ once. Yet we know we need a financial sector that doesn’t continue to trash the planet and societies, doesn’t fund fossil fuel operations destroying the planet, doesn’t pour money into the destruction of rainforests and stuffing of the oceans with plastic, and doesn’t spread poverty and inequality through funding sweatshops and outright slave labour. The US Federal Reserve and European Central Bank this week simultaneously signalled their intent to make climate considerations a central part of finance. We’re not world leading, but trailing, yet again.
Although we are, of course, world leading in dirty money – you need look no further than the amount of Russian-sourced money of dubious antecedents sitting in London. We are a major centre of global corruption. The City is an Aegean stable – and the financial services bill is clearly very sparing in its distribution of shovels. One useful proposal that will emerge in the Lords is an amendment to create a new corporate criminal offence for companies or bodies regulated by the FCA of failing to prevent economic crime.
We clearly do need, post-Brexit, a Financial Services Act but as it stands this bill is nothing like what we need. We’re seeing increasing numbers of communities around the world understand the model of economic, society and finance that’s needed – one that allows us to live ‘in the doughnut’, in the essential space that respects planetary limits while meeting human needs, ensuring everyone is treated with respect, as defined by the economist Kate Raworth in her book Doughnut Economics.
We need a Financial Services Act that sets out how our financial sector can support the journey to that, the root-and-branch redesigning of the economic system. This would be a financial sector that takes care of all our needs, instead of risking our security and our future.