February 25, 2024
Finance

Politicians must give ‘full-throated support’ to finance


Central bankers rarely get an easy ride. They are always doing too much or too little, depending on your outlook.

If there’s one man who has escaped that inferno without even a dusting of charcoal, it is Andy Haldane. That’s no mean feat — the former chief economist of the Bank of England spent 32 years within the Old Lady’s walls.

He was, if reports are to be believed, some politicians’ favourite to become governor, had Labour triumphed in 2019. The traditionally left-wing party has been courting a host of private equity and banking executives in recent months as it tries to pitch a new brand to the City.

There will be a “stasis” in policy due to elections this year, Haldane predicts. But if he has pinned his own political stripes to the mast of either of the major two parties, he is careful not to show it. Even his tie is a neutral green.

What he is clear on is that the City will be key to the UK’s future growth. “There’s more that both parties could do to give full-throated support to financial and professional services,” Haldane tells Financial News. “It’s without question the case that of the sectors we are globally competitive in, financial and professional services are among them.”

His former colleagues at the Bank have stayed steadfastly neutral on one of the biggest issues affecting the sector: Brexit. But it’s on this topic that Haldane shows his first flicker of partisanship.

“Is there more we can do within Europe, as Labour have said? I hope the answer to that is yes.”

Born in working-class Sunderland and educated in Guiseley, Leeds, Haldane hasn’t always been a friend of the City’s banking set. He warned that bonuses were out of hand before the financial crisis. The Occupy Movement’s “loud and persuasive” voice had stirred valuable discussions about inequality, he told a debate held by the protest group in 2012.

Trade unions slammed regulators’ decision to scrap the cap on banker bonuses in October as a return to the “greed is good” culture pre-crisis. But Haldane isn’t so concerned by the move this time around.

“When I was at the Bank, it was felt that it was a laudable aim but poor execution,” he says. “That resulted in more of the pay coming through fixed pay, which is even less risk-sensitive. Having something practical on pay makes sense.”

READ Banks stalling pay overhaul after bonus cap scrap

A man once branded ‘Mr Boom’ shows no sign of relinquishing his dovish credentials, though. Inflation might be back near the Bank’s 2% target by Easter, Haldane predicts, and rate-setters might “fight the last war for too long”.

“Never say the battle is won, but for me, the risk we in the UK face right now — the greater one — is of us tipping into a recession, rather than letting the inflation cat out of the bag.”

But worrying about toeing the line — or obsessing over interest rates — is no longer the all-consuming role it once was for Haldane. He has flexed his intellectual muscles on everything from ‘levelling up’ to the UK’s industrial strategy since becoming chief executive of the Royal Society of Arts think-tank in 2021.

“The Bank was very generous, letting me opine on a whole range of issues. But part of the attraction of being on the outside is working full-time on some of the issues the UK needs to solve,” Haldane says. “The Bank doesn’t build bridges or roads or broadband. I will always be a public servant and always tend to gravitate to where I think the issues are most important.”

Since his departure from the Bank, it has had to navigate the fallout from Brexit, Covid-19 and wars around the globe.

It has also been in a battle with increasingly assertive policymakers at home, too. Its regulatory arm, the Prudential Regulation Authority, has been given new objectives concerning growth and international competitiveness, in a bid to spark life back into London’s moribund capital markets landscape.

The Bank has also been probing areas such as AI and cyber crime to react to emerging threats. Another prime risk is highly leveraged private markets firms.

“It’s right that my former colleagues are being extra vigilant,” Haldane says.

But he says policymakers might have missed something: the potential atrophy of financial services skills and talent, if the home-working revolution continues apace. “All my learning was done through a conversation with someone, saying: ‘I have a stupid question…’ I do think a lot of that is being lost by working in their bedrooms.”

READ Regulators took a beating in 2023. Why AI will be their next challenge

Haldane warns the “social contract” of building trust and relationships and understanding your colleagues and clients could be eroded — “meeting is crucial for that”.

A techno-optimist at heart, he is bullish AI can help solve this learning gap, however. That’s especially the case for educating youngsters from less-privileged backgrounds. “Financial and professional services have not started in a great place on socio-economic diversity… I do think it would give the City a great richness to lead the line,” he says.

He’s also bullish on the potential for the Bank to launch its own digital currency — one that pays interest — and gives a “giddy up” to the UK’s archaic payments infrastructure using technology.

“The Bank can’t not take a very active interest in that,” he says. “I was saying 10 years ago it’s only a matter of time before the Bank was issuing some of that stuff.”

As with his speeches at the Bank of England, it’s impossible not to come away with food for thought. How much his former colleagues heed his words could still shape the City in the years ahead.

CV

Born
August 1967

Education

1985-88
BA, Economics, University of Sheffield

1988-89
MA, Economics, University of Warwick

Career

2023-present
Chair, Industrial Board, AMRC Training Centre

2021-present
CEO, The RSA

2023
Council of Economic Advisors, HM Treasury

1989-2021
Various roles, Bank of England including:
2014-21
Chief economist

2009-14
Executive director, financial stability

2005-8
Head of systemic risk

2003-5
Head of market infrastructure

1998-2003
Head of international finance

1989-98
Manager and economist, monetary policy

To contact the author of this story with feedback or news, email Justin Cash



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