As the country faces another period of squeezed living standards, Sam Bright explores how the masters of high finance have been welcomed into the heart of power
Sign up for our weekly Behind the Headlines email and get a free copy of Byline Times posted to you
In an effort to calm the financial markets, Chancellor Jeremy Hunt yesterday announced a package of £60 billion in tax rises and spending cuts, designed to show that “we do not leave our debts to the next generation.”
The impetus to assuage the markets has been partly caused by the ‘mini’ budget announced by Liz Truss and Kwasi Kwarteng on 23 September, which announced a series of unfunded tax cuts concentrated among the already wealthy. In the three weeks after she took over as Prime Minister on 6 September, UK markets lost $500 billion in value.
Hunt used his statement to declare that the UK now has a £60 billion fiscal black hole that needs to be filled – partly as a result of the Government’s own stringent debt rules, and partly due to the £30 billion in lost revenues and more costly borrowing created as a result of the mini budget.
In the immediate aftermath of Truss’ economic earthquake, which preluded her resignation, commentators across the political system – even on the right – complained of the power of market forces in our democracy.
There was no other choice for Truss other than to depart 10 Downing Street, explained Paul Dales, chief UK economist at Capital Economics. “The resignation of Truss is a step that needed to happen for the UK Government to move further along the path towards restoring credibility in the eyes of the financial markets,” he said.
However, this dependency on the financial markets is of the Government’s own creation. Indeed, alumni of financial firms and their agents have been welcomed into the heart of power – perhaps going some way to explaining why the Government has today released a fiscal statement that is orientated around the interests of financial markets rather than the British public.
Almost a decade of economic growth is expected to be reversed in the coming years, while average real earnings are still below their 2010 levels – yet the Government is following-through on Truss’ pledge to remove the cap on bankers’ bonuses. Hunt also covertly announced a reduction on the surcharge applied to bank profits, from the planned 8% to 3% next year.
Some 20% of Rishi Sunak’s Cabinet formerly worked in financial services, while 10% are ex-management consultants, according to an analysis by Byline Times. The majority of Sunak’s top team have backgrounds in financial services, consulting, law or professional politics.
Moreover, Byline Times reviewed the backgrounds of all the non-executive directors appointed to ministerial departments. These are external figures who sit on the boards of Government departments, helping to “shape the strategic thinking of ministers and officials” by providing advice and counsel.
Of the 64 non-executive directors currently listed by the Government, almost a-third – 21 – have a background in financial services. Eighteen non-executive directors have meanwhile held roles at management consultancies.
FUND MORE INVESTIGATIVE REPORTING
Help to expose the big scandals of our era.
All three Ministry of Defence non-executives have a banking background, for example, while the lead non-executive of the Cabinet Office, Michael Jary, is the founder of a management consultancy and simultaneously holds a non-executive role at Barclays. A fellow lead non-executive at the Cabinet Office, Anand Aithal, is a former managing director of Goldman Sachs, the investment bank that employed Rishi Sunak between 2001 and 2004. The Guardian revealed in April that Aithal, who is domiciled in India, has non-dom status, meaning that he pays some taxes abroad. Sunak’s wife, Akshata Murthy, has previously retained non-dom status.
Two of the Treasury’s non-executive directors are graduates of management consultancies, while one simultaneously serves as a non-executive director of Standard Chartered, the multinational bank, and one is the former senior partner of a global law firm.
Britain is home to some of the world’s largest management consultancies, that provide accountancy services and business advice to governments and corporations. As described by Daniel Markovits in The Atlantic: “management consultants advise managers on how to run companies; McKinsey alone serves management at 90 of the world’s 100 largest corporations”. Essentially, they advise the owners and senior executives of companies on how to become more profitable. As Markovits describes, their current ubiquity – especially in American and British corporate life – has corresponded directly with “job cuts and the explosion of elite pay”.
The Revolving Door
Of the non-executive directors who are not drawn from the world of high finance or consulting, they are more likely than not to be linked to big corporations. Non-executive director at the Foreign, Commonwealth and Development Office, Ann Cormack, spent 20 years working for Shell International, while Peter Mather of the Department for Business, Energy, and Industrial Strategy spent 40 years working for BP.
There is also a smattering of non-executive directors with political links, including Henry De Zoete, who worked for the Vote Leave campaign; former Conservative MPs Douglas Carswell and Sir Stephen O’Brien; former Conservative councillor (and ex-BP employee) Pam Chesters; and Conservative peer Lord Gary Porter.
Indeed, throughout the Cabinet and ministerial departments, there are seemingly only a handful of people with substantial experience in key worker industries – the likes of policing, frontline healthcare and education. Of the 94 individuals who hold Cabinet positions and non-executive roles at ministerial departments, only 12 have held roles for any period of time that do not belong to the worlds of finance, law, consulting, politics or business. Most of these individuals, as previously reported by Byline Times, have served in the armed forces – with a vacuum of experience in other frontline public services and essential occupations.
Half of the non-executive directors at the Department of Work and Pensions – which administers benefits on behalf of some of the poorest people in the country – have held senior positions in major banks.
The Government maintains that non-executives “are appointed on merit, reflecting ability and experience”, bringing “a diverse mix of expertise and skills from across the public and private sector”.
As mentioned, Sunak is himself a product of this world, having served at Goldman Sachs after graduating and subsequently sharing in a lucrative hedge market bet that “lit the touch-paper on the 2008 financial crisis”, according to The Times.
Banks also help to endow politicians and their causes both during and after their political careers. During the 2019 General Election campaign, 40% of the Conservative Party’s income came from the financial sector, while the party raked in £11 million from City donors in the 18 months following the election.
In September, former Cabinet minister Sajid Javid received £30,000 for a two-hour speech to internal executives at HSBC, following the £36,000 that he received a year earlier from Deutsche Bank – a firm that employed Javid before he entered politics, to the tune of £3.4 million-a-year. On entering the Cabinet in June 2021, Javid was forced to give up an £150,000-a-year advisory role at the investment bank JP Morgan.
Yet Javid is not the only politician to have taken advantage of the financial opportunities afforded by big banks. Former Chancellor George Osborne – who is reportedly now advising Hunt – joined the investment giant BlackRock as an advisor in 2017, earning more than £200,000-a-year. In April 2020, former Prime Minister Theresa May was paid £160,000 in advance by JP Morgan for two speeches that had to be postponed due to the pandemic. The Telegraph recently reported that the bank had offered Boris Johnson £2 million to give six speeches at JP Morgan events, though the firm has since distanced itself from these claims.
Ministers have actively nurtured a co-dependency with private financial institutions over the last 12 years – a relationship that has seen low taxes, diminished regulations and ‘fiscal responsibility’ prioritised over the needs of ordinary Brits. Hunt’s statement today was merely the latest expression of this political subservience to the masters of high finance.
OUR JOURNALISM RELIES ON YOU
Byline Times is funded by its subscribers. Receive our monthly print edition and help to support fearless, independent journalism.