So often one hears from the vociferous and occasionally visceral chairmen of some high profile parliamentary committees such as Andrew Tyrie, Margaret Hodge and Adrian Bailey. They love attracting publicity on matters of public concern in the same manners as honey attracts bees! Today the excellent and very visible chairman of the Public Administration Select Committee (PASC), the admirable Bernard Jenkin, posts it’s findings on ‘Leadership for the Long Term.’ This 65 page report covers the long-term planning for the future of most government departments administered by the Civil Service.

I am not really qualified to comment on much of the content. However I was more than interested in the findings on what appears to be a perceived lack of contingency plans for the financial and banking sector, in the advent of another disaster such as was experienced in 2007/8.  The PASC observed that the government had not included the threat of a financial meltdown in its National Risk Register.  Bernard Jenkin and his colleagues suggested to Treasury Mandarin Sir Nicholas MacPherson that the financial and banking sectors were ill-prepared for another crisis that might manifest themselves such as a Eurozone crisis, a terrorist attack, a major bank collapsing or a serious cyber-attack.

Though the PASC acknowledged the leading role the Treasury plays, it felt that the government of the day needed to strengthen its role to regulate financial institutions in conjunction with the Bank of England. The PASC felt that not only was there too much of a ‘short-term’ approach to issues, but also policy was too slow being adopted, too reactive and uncoordinated. The recent Ebola outbreak had illustrated the damage that can be inflicted by slow response. The need for contingency plans for flu, flooding and such had been grasped. As far as the financial sector was concerned integrated plans were too slow coming to fruition. Both Sir Jeremy Heywood and Oliver Letwin, who both gave evidence, agreed there was greater need for integration.  It was also agreed that digital education in the next 5 years was a prerequisite. It was also acknowledged that the National Security Council tended to focus on crises rather than longer term challenges.

The PASC recommends that there should be much closer coordination between the Cabinet Office and the Treasury, enabling better cross-government financial planning and management being implemented, rather than just the spending limits being imposed by the Treasury. PASC members thought that the Cabinet Office focused disproportionately on threats rather than opportunities.

Two years ago Andy Haldane, now the Bank of England Chief economist, but then responsible for financial stability, warned that the threat of another ‘bail-out’ or a stock market downturn, which would trigger a massive loss of income and output was potentially as dangerous as another world war! However Mr Haldane was very keen to point out that the Prudential Banking Authority and the Financial Policy Committee were now acutely aware of their responsibilities.

The National Audit Office was accurate at forecasting in good and bad times, but no particularly adroit at inflexion points. The Office of Budget Responsibility was a measurable improvement.

Since the appointment of Mark Carney as Governor, the Bank of England has been given enormous powers by the Government and Treasury. Mr Carney has let it be known that he/the Bank are insistent that badly run large banks will be allowed to fail without threatening economic and financial stability. This reassurance is gratifying as there is still massive risks going forward of banks collapsing.

The Bank has strengthened its senior management. Messrs Carney, Cunliffe, Shafik, Haldane, Bailey and Wheatley are strong, resolute and diligent leaders. They will surely have been working behind the scenes to cover all unwarranted or unexpected eventualities.  Nonetheless Mr Jenkin’s committee is absolutely ‘spot-on-the-money’ in insisting on greater transparency for contingency plans to counteract a terrorist or cyber-attacks or an economic collapse. There is little evidence of fully comprehensive and cogent contingency plans being in place. The implementation of a crisis plan, conducting desk-top simulated exercises, involving the National Risk Register and an education for better short and long-term planning is essential.  In general, most banks have ‘disaster recovery plans’ ready to roll in the event of a disaster.  It is up to the Treasury/Bank of England to make sure they are prepared on a national basis.

This Committee’s findings is not a criticism or an indictment against government policy or housekeeping.  It is just a very timely warning shot across the bows to be vigilant and more to the point READY!


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