Douglas Carswell's Blog

Let battle against crony capitalism commence!

I'm delighted to see the Prime Minister taking up the fight against crony capitalism.  It's a theme this blog has returned to again and again.

Allowing those who own companies more control over those who manage them are a great idea.  Full marks to Jesse Norman MP, with whom I once worked in at the Conservative party's policy unit, for all the work he has done on this. 

But we should do much more than reforming corporate governance:

1.  Open market procurement:  when tax payer money is spent on buying goods and services, it ought to go to the firm that provides the best value.  For all the lip service paid to open tender, in reality the rules often act as a barrier, keeping out competition. 

Rather than centralise the procurement system, which will exacerbate these problems in pursuit of illusory gains from economies of scale, government needs to go for genuine open market rules for everything from health contracts to IT and defence.

2. Axe Public Finance Initiative:  this system of off-balance sheet spending commits future generations to buying things that they might not actually want or need. It also encourages big business to behave as rent seekers brandishing contracts, rather than as service providers for happy customers. 

Strangely, the Coalition has continued to nod through even more PFI contracts when they ought to have begun to wind down the wretched things instead. 

3.  Lobbying rules:  too many vested interests benefit commercially from graft.  Ministers’ diaries should be public information, so we can see who they are meeting.  The rules need tightening up so that top Whitehall mandarins who decide to work in the private sector cannot sell insider information to benefit crony interests.

4.  Banking reform:  big banks and central banks form a cosy, corporatist nexus at the heart of our supposedly free market economy. With central banks as the lender of last resort, and banks able to exchange money for an endless supply of IOU bonds, banks are, in effect, able to conjure credit out of thin air, and sell it on for a profit.

Credit booms followed by bust are the result. Money also ends up being managed in the interests of those who want to borrow and consume, rather than save and produce.

5.  Regulating the regulators: far from preventing things going wrong, industry regulators – such as the Financial Service Authority – often seem to be part of the problem. 

At best many regulators become, to use Christopher Booker’s brilliant phrase, a sledge hammer that misses the nut. At worst, the regulator can itself end up being captured by precisely the big corporate vested interests it ought to be holding at bay. Big business starts to set its prices on the basis of what the quangocrats will allow, rather than what willing customers are prepared to pay.   See rail fares or energy prices or BBC license fee.  

Regulators need to be made openly accountable for what they do – and wherever possible replaced by the toughest regulators of the lot – the discerning customer in a free market.

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