EXPOSED: New PM to give bankers more power to gamble on food
By: Nick Dearden
Date: 26 July 2022
Campaigns: Food
Last week, as the first stage of the Conservative leadership contest reached its climax, our caretaker government introduced a piece of legislation which can best be described as a Speculator’s Charter. If passed in the autumn, the Financial Services and Markets Bill – drawn up by Rishi Sunak’s Treasury and introduced by the Cabinet that still contains Liz Truss – would unleash a wave of dangerous financial trading, fuelling volatility in the economy and further driving up the prices of basic commodities. In the middle of a cost of living crisis, with people across the world struggling to pay for food and energy, it’s perverse.
It’s 15 years now since the financial crash showed up the global economy as a giant casino, with no care for the livelihoods of ordinary people or the health of our planet. When things go wrong, the poorest pay the price, while the bankers are bailed out. In fact, that logic of making a quick buck and throwing the cost onto the rest of society and future generations, has seen our economy hollowed out. Modern businesses have started to consume themselves in order to hand over wealth to their shareholders, enriching the haves, and further entrenching inequality. No wonder the crash has become a defining moment in post-war history, laying the ground for the political turbulence which now characterises the world.
In the wake of that crash, small changes were made to the financial system to prevent a future crisis. They didn’t amount to much, and they were watered down in the decade that followed. But they were something.
Now, the British government is preparing to sweep away those protections and unleash what then chancellor Rishi Sunak called a second financial ‘Big Bang’, recalling Margaret Thatcher’s 1986 deregulation package which ‘set the City of London free’, fuelling a wave of speculation and financialisation, instability and unrestrained greed. It’s what Conservatives like Sunak always wanted from Brexit – to undercut European regulation and turn London into even more of a playground for speculators and foreign elites. Truss, with the zeal of the Brexit convert, wants to cut not only European financial regulation, but everything – a bonfire of rules and rights.
The really astonishing thing is that this bill is introduced just as we are waking up to another cost of living crisis, fuelled by inflation. But inflation has not been driven by sky high wage bills. In fact, some of the most important price increases are being fuelled by financial markets, bidding up the costs of energy and food commodities around the world. This, more than the invasion of Ukraine and the despicable action of President Putin, is responsible for the rising cost of food and energy.
Betting on hunger
To be clear, many more people will go hungry this year, even though we have plenty of food to feed everyone, because a tiny minority can make a fast profit. As UN Special Rapporteur Olivier De Schutter has said of the banks and hedge funds “They are indeed betting on hunger, and exacerbating it.”
If you want to control inflation and drive down the cost of living, you need to constrain the financial markets. But the British government is proposing to give even more power to this sector, allowing speculators and financiers unlimited power to, in effect, set prices of basic commodities. Many of those gambling don’t even have the space or ability to take possession of the wheat, soy or oil that they are betting on.
Far from empowering regulators, the Financial Services Bill will undermine them, forcing them to promote the ‘global competitiveness’ of Britain’s financial industry. This is a wholly inappropriate obligation, which would turn the very people trying to hold the City to account into its cheerleaders instead. The UK parliament has already acknowledged that a focus on competitiveness by regulators contributed to the financial crash. Former coalition government minister Vince Cable warns that it will drive a “race to the bottom”, and leave the UK in danger of another crash.
After a week in which Europe was confronted by the reality of climate change, and given that UK banks and asset managers fund nearly double the annual carbon emissions produced by Britain itself, we need to force the City to reduce its outsized damage to the environment. With more and more people affected by a cost of living crisis in the UK, we need to compel the financiers not to exclude huge numbers of people from the services they need to live a normal life in modern society. And, given the City’s huge impact on the rest of the world, we need to make sure regulators are armed with the tools to rein in that power.
We need to do more to constrain the financial sector, not rip away the rules already in place.
Labour leader Keir Starmer also needs to wake up to the threat in front of us, as to date he seems determined to try to compete with the Tories in this financial race to the bottom, telling City AM recently that we could have a better future outside the EU if we slash ‘red tape’ on the bankers. We all know now that Starmer sees acceptance of Brexit as his path to power. But this goes far beyond accepting Brexit as a reality and making the best of it. It’s unclear what Starmer thinks he can gain by trying to outcompete the Jacob Rees-Mogg and David Frost wing of the Tory party on their own terrain. Financial deregulation is not electorally popular, and while Starmer wants to focus on “growth, growth, growth”, the truth is that any economic growth produced under this model would not help ease the cost of living crisis but would continue to fuel Britain’s over-centralised, highly unequal economy, with ordinary people feeling they have even less power over their lives, not more.
We need to do more to constrain the financial sector, not rip away the rules already in place. While neither Sunak nor Truss are likely to divert from this course, there is disquiet on the backbenchers about this bill. And a new coalition – Finance for our Future – has been set up to fight these proposals. This will be the biggest reform to financial regulation in a generation. We cannot allow it to give away even more power to the speculators in the City of London.
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Photos: Miha Creative/Shutterstock; Number 10/Flickr; Ministry of Housing, Communities and Local Govt/Flickr.
