So, tell me again about how the crisis put manners on the financial ...

Posted by WorldbyStorm in Economy, Irish Politics.
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Here?s a report by Harry McGee on the Finance Act which manages to point up much that is wrong with the decision making process in this society and underscores how the orthodoxy remains in place despite the crisis. McGee notes that the Finance industry has a ?Clearing House Group??

The Government at its highest official level and all the main players in a particular sector form a body with the ostensible aim of expanding and developing that sector. The body is chaired by the top civil servant in the country. A byproduct is that the sector gets unfettered access to lobby in its own interests.

As McGee notes drily:

Unsurprisingly, the homeless or unemployed organisations do not have a Clearing House Group, nor do other sectors such agriculture, tourism, or manufacturing. But the financial services sector does, in the shape of the IFSC Clearing House Group.

And who is on the CHG?

The group is chaired by Martin Fraser, the secretary general of Government. The main body and its subcommittees meet in Government Buildings. Civil servants and representatives from State agencies such as the IDA and Enterprise Ireland sit on it. The rest are made up of a who?s who of banking, financial and legal giants: JP Morgan, Citi, State Street, IBF, Barclays, Bank of Ireland, KPMG, Bank of America, Deloitte, AIB, William Fry, Ernst and Young and PWC.

Now, as McGee notes there?s some justification for ?a part of its work?? not least due to the centrality of financial services to government job creation plans (though given what is happening internationally and locally to financial services in the broader sense one would have to wonder is that a forlorn hope). But McGee also notes ?extraordinary influence wielded? by the CHG.

And this can be quantified to a degree. He notes:

[this was seen] in two key areas: tax incentives for the industry; and the position adopted on the EU?s proposal to introduce a financial transaction tax (FTT) of 0.1 per cent on stocks and bonds; and 0.01 per cent on derivatives trading.
The Government?s eventual position on both issues dovetailed exactly with that put forward by the financial industry?s lobbyists, who supplied position and research papers; suggested draft legislation; and commissioned consultants? reports.

You betcha!
But also:

A total of 21 changes to the Finance Act were made to accommodate the sector including a contentious incentive that allowed foreign executives with companies based in Ireland to pay tax on only 70 per cent of income between ?75,000 and ?500,000.
The Revenue Commissioners opposed another incentive that allowed executives to claim tax relief on school fees up to ?5,000 but after further lobbying the relief was included in the Act.

And notably:

On the latter, it was always a certainty that the Government would oppose the FTT. But records disclosed under FOI requests from The Irish Times, and an earlier request by Labour MEP Nessa Childers, show the extent of the engagement and the degree to which the Government and the sector worked in concert. The documents also show how the Government position closely reflected that of the industry on that key issue.

It is heartening that some public representatives and media are considering this area, though the lack of prominence on the issue is deeply disturbing.

I?ve often noted that in this society there is an often unspoken and unreflected reality of a ?capture? by business ? or if one prefers capital. The crisis has exacerbated that tendency to the point where now there is little check on the narrative of what is good for business is good for the economy and therefore for society. But it is truly remarkable that after the single greatest display of market failure in our lifetimes the sector which was centrally involved in that failure should be given preferential treatment over others. And the degree of influence that this information demonstrates is worrying.

McGee makes one other point that is absolutely crucial, that while there may be a justification for CHG ?lobbying? ? though in and of itself it would appear to dangerously blur the distinction between government policy making and industry special pleading ? its very nature predicates against other viewpoints being heard on the matter in the decision making process. As he says, there?s no workers or unions or other potentially (I like that ?potentially?) interested parties involved in the CHG.

A capture indeed.

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Source: http://cedarlounge.wordpress.com/2012/10/11/so-tell-me-again-about-how-the-crisis-put-manners-on-the-financial-services-sector/

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