It has been a depressing few days for democrats, and
especially for those democrats worried about the power of business. The shiftiness of Bob Diamond and the
extraordinary innocence of Paul Tucker about money market practices coincided
with the publication of two reports that highlight the way corporate interests
are organised to shape public policy in the UK.
Democratic Audit, which has
now been auditing democratic practices in the UK and elsewhere for over twenty
years, published its fourth audit of democracy in the UK. (Downloadable at http://democracy-uk-2012.democraticaudit.com/how-democratic-is-the-uk-the-2012-audit.) The Bureau
of Investigative Journalism meanwhile published the most comprehensive and
well researched study we have yet seen of the lobbying activities of interests
in the City of London (downloadable at http://www.thebureauinvestigates.com/). The section in Democratic Audit’s report on
accountable government, combined with the Bureau’s investigation of the web of corporate
patronage spun by the City, together give us the essential background to the
extraordinary arrogance revealed by the behaviour in the Libor scandal and the
astonishing blindness to this behaviour displayed by senior regulators like Mr
Tucker.
What these two reports show is a fundamental change in the
recent decades in the way business has exercised power in the UK. Some of this change is due to factors
external to business itself, factors that are a major theme of the work of
Democratic Audit. These changes are
atrophying the official institutions of democratic participation. The two most obvious indicators concern
voting in general elections – the single most important summary sign of the
health of national democracy – and the membership of the political parties. Voting offers us a paradox. In the last couple of decades voting
opportunities (referendums, elections for devolved systems of government,
elections for mayors and even now for police commissioners) have proliferated;
but turnout has declined. Meanwhile the
mass party – the capillary tube of the democracy – has simply vanished: parties
that a generation ago had millions of members now typically have less than
200,000. The Westminster parties in particular have shrunk to tiny cadres of
professional careerists.
The decline of these institutions and practices has created
a vacuum now being filled by other institutions and interests. This is how we
should understand the new world of corporate lobbying documented by Democratic
Audit and, especially, by the Bureau of Investigative Journalism’s work on the
City. A generation ago business had to
work alongside, and often in opposition to, powerful institutions of civil
society: a trade union movement with large and well organised membership in the
private sector; political parties that could rely on mass membership to
generate the bulk of the money that they needed. Business certainly exercised power, and the
City in particular exercised great influence through a network of informal
contacts, mostly funnelled through the Bank of England. But the decline of so many countervailing
influences in civil society, and especially of the mass party, has created the
opportunity for much better organised, and more pervasive, corporate
influence. The new world of City
politics revealed by the Bureau’s work shows, in particular, three profound
developments. The first is the
colonisation of the parties through the use of money. Since corporate lobbying is opportunistic
this mostly affects parties in office, or those with a reasonable prospect of
office: this explains the surge of financial support from the City for the
Conservatives since David Cameron’s assumption of the leadership in 2005,
closely documented in the Bureau’s report.
The second is the pervasive infiltration of City interests into the
institutions of government. Of the many
instances of this penetration in the work of both the Bureau and Democratic
Audit, one of the most revealing and hitherto neglected is the way City
interests have colonised the House of Lords: 16 per cent of active members of
the House (124 out of 775) declare paid positions in finance firms. And that’s only the most minimal measure of
connection, based as it is on a declarable interest. The significance of this is simply not
appreciated, because the significance of the Lords is not appreciated. The second chamber is no longer a joke. The Life Peerage reforms (dating from 1958)
have transformed the institution. It is
now a much more expert and competent body than the Commons, and much the better
place for interests to shape the detail of policy and legislation. And in financial regulation it is the detail
that matters.
The third great change is probably the least appreciated of
all: the City has revolutionised its internal government. The Corporation, until recently a mostly
charitable and ceremonial body, has been turned into a largely autonomous
governing institution for the richest bit of territory in the UK. And, as the Bureau’s investigations show, it
is turning its considerable firepower – money, and the advocacy skills that money
buys – into a sustained promotion of the interests of the finance sector.
In the wake of the report from John Vickers’ Commission, and
the most recent banking scandals, attention has, quite reasonably, focused on
the problem of the substantive reforms of the banking sector. But reform of institutions and business
practices is not enough, and indeed will probably be impossible to achieve
until the power of the City as an organised lobby is confronted. The Bureau’s work, and the continuing work of
Democratic Audit, is a start on that long hard road.
Pooter
