COMMENTS ON TREASURY PROPOSALS AND RECOMMENDATIONS FOR FUNDAMENTAL CHANGES IN ECONOMIC POLICY IN THE UK
The initial aim of this paper was to review the proposals
made in July 2009 by the Treasury for the reform of the Financial Sector [FS].
It soon became clear that this limited objective would leave far too many
issues relating to the conduct of financial and monetary policy as if these
were unimportant. It is argued in the following that the conduct of economic
policy has been lamentable in many respects and that the failings of the FS are
only a sub-set of a general problem.
It follows that reform of the FS needs to be located within
a framework for the effective conduct of economic policy overall – something
that the Treasury White Paper fails to do. Subsequently the Coalition
Government set up the Independent Commission on Banking [ICB] to advise it on banking reform and
the paper takes account both of some its proposals, and also of recent economic
and fiscal policy. The fundamental thrust of the paper is that effective reform
of the financial sector must take into account how the financial system
interacts with the rest of the economic and social system.
The paper is essentially in 6 parts:
1. Role,
Function and Performance of the Financial Sector.
2. Assessing
the Costs of the Financial Crisis.
3. Too
Big to Fail and the Consequences for Economic Policy.
4. Housing
Bubbles and Housing Needs
5. What
is Needed for an Effective Monetary Policy.
6. Policy
Options for a Fractured Economic System
