Tripartite regulation was introduced by Gordon Brown in 1997 and has, as shadow chancellor George Osborne pointed out, “failed to protect Britain’s economy from over-indebtedness, a banking crisis and ultimately recession”.
But as Sir James pithily remarked in an interview in the Evening Standard, “It’s a bold organisation that is telling you it ought to be abolished”.
Sir James’ main thrust is that the Bank of England and the Financial Services Authority have not been communicating on the impact of macro-economic issues on firms. He proposes that there should be a public exchange of letters every six months in which the Bank identifies such issues and the FSA responds.
Given that the Treasury seems incapable of understanding the impact of macro-economic trends on the economy and that it and the chancellor seem incapable of communicating, a few emails between a King and a Lord won’t put the world right.
The Treasury has consistently underestimated the scale of the recession and can’t even get its sums right for the next Budget.
The Centre for Economics and Business Research warns £39bn does not appear to have been factored into the predicted tax revenue decline for 2009/10 outlined in the pre-Budget report.
There is little evidence that the longevity of the problem is yet fully understood in the Treasury.