Lord Turner's remarks in Prospect are worthy of scrutiny because they are illustrative of a sea change in opinion. For at least 20 years the UK financial services industry has been a major employer and a vital contributor to tax revenues. It is recognised as one of the few sectors where the UK is world-beating.
Now Lord Turner believes it has grown 'beyond a socially reasonable size' and has 'destabilised' the structure of the UK economy. Of course we should be having a debate about the type of economy we want in future. And unfortunately the impact of the global economic crisis means we have little alternative but to rebuild it. But I am not sure what Lord Turner is aiming to put in place of the financial services industry. It is right that the regulator should not be a cheerleader for the industry, but it is equally important that he, and we, should also recognise that the financial services industry is of immense strategic value to the UK.
Stricter capital requirements should offset risky compensation policies. Deferred bonuses should help bankers look beyond short-term gain. But Lord Turner is also advocating a global tax on transactions to ensure banks do not engage in unnecessary activity. We should be grateful that other governments will not be so keen to follow his suggestion. By all means debate the detail but do not lose sight of the true social purpose of banks - to grow national and global economies for the benefit of us all.
The regulator, Lord Turner, should of course ensure better regulation. His job is to ensure good governance of the system. But the banks need to better communicate what their social contribution is or face government intervention for a generation.