Morning:
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The Governor of the Bank of England, Mervyn King, may not have had a particularly good war during the credit crunch but he may yet win the peace.
In a combative speech in Edinburgh last night he squarely sided with the view that banks' functions should be separated out between those elements that should be underpinned by the taxpayer and those that need not be. As he says, during the financial crisis the taxpayer underpinned the banking sector to the tune of no less than £1 trillion, a sum too large for most of us to imagine.
His speech has been driven, obviously, by irritation that bankers have reverted to their bad old ways in terms of awarding themselves bonuses - predicted to rise by 50 per cent on last year. But quite apart from this provocation, there is a sound case for separating out investment banking - with all its attendant risks - and ordinary retail banking which enables businesses and individuals to lodge their savings and take out loans. It is that latter function that cannot be allowed to fail and which the taxpayer must at all costs support; it is hard to see why there should be a similar obligation to support speculative activities.
No sane person would want to handicap the City through unnecessary regulation - the entire economy, and particularly public services, depends to a significant extent on the profits of the much-maligned financial sector. We should welcome the present resurgence in confidence in the City. But it could be argued that separating out banks' retail activities from their riskier operations would actually encourage more intelligent financial activity. If banks imagine that in their entirety they will always be bailed out by the taxpayer, it does not encourage a rational view of risk and reward. The possibility of the investment banking side of an institution going under by dint of imprudent activity is, by contrast, a powerful incentive to sound judgment.
As for bonuses, it is unrealistic to expect financiers to undertake some kind of self-denying ordinance to forgo them lest they be lynched by an irate public. Rather, as Anthony Hilton observed in this paper on Monday, we should be concentrating on how, precisely, they are able to reap such large profits. As Mr Hilton suggests, financial institutions - especially with fewer of them - are simply charging over the odds for what are fairly straightforward corporate services, fees which their clients are too supine to challenge. In any other sector this would invite new entrants and vigorous competition. Why not here?
Strike breakers
The spectacle that should cause the Communications Workers Union to think twice about tomorrow's postal strike is that of tens of thousands of individuals lining up to take jobs on the minimum wage to enable the post to keep moving during the stoppage. The reality that many of them will have undergone few if any criminal record checks is, for that matter, not reassuring for the rest of us but the number of willing applicants for the job should inject an element of realism into negotiations. Neither management nor unions have come out well from this dispute which has alienated the public from a service which it greatly values. It's time for compromise.
Tory swingers
Ed Vaizey, the shadow arts secretary, says that the 2012 Cultural Olympiad should feature venerable oldies such as Led Zeppelin and the Rolling Stones as well as exciting young artists. Something for pensioners, then, as well as teenagers: all we need is a little opera and jazz and we'll all be happy.
