Teresa Hunter: Little risk of regrets in the real world

Published on Saturday 13 March 2010 14:19

I'M not sure I heard anything I didn't know when sitting through endless sessions at the National Association of Pension Fund's conference in Edinburgh last week, but I did learn new technical terms.

The first was "regret risk", a new scientific name for when we look back on what we have done, only to see what a muck up we made of it. It replaces outdated terms such as guilt, remorse and shame.

As we approach a general election, the potential for regret risk has seldom been more acute. Getting it wrong could prove disastrous. But none of the parties has yet captured the public mood.

Before we vote we have a Budget in a bit over a week, and Chancellor Alistair Darling has promised a sensible statement fit for the times we are living in, which is what most of us would like to see.

In reality, with no money and only a week to get a Finance Bill through Parliament before recess and electioneering begins, it'll contain precious little we don't already know about.

Anti-avoidance measures for the new 50 per cent tax rate, that sort of thing. There will be some vote-catching pledges for the future. And before Darling could get his words out, chief secretary to the Treasury Liam Byrne, said to be a Brown man, was shooting his mouth off saying there would be no tax rises under Labour.

Excuse me while I die laughing. Do you remember how Labour promised no tax rises on gaining power in 1997? And what followed?

They taxed our pensions to extinction, emptied our pockets via National Insurance hikes, ramped up council tax to the point where you need a mortgage to pay it, and that's all before you consider fuel duty and airport taxes.

Income tax alone this year, at 140 billion, will be double the take when Labour came to power. Ditto, National Insurance. That subscription scheme, which is not supposed to be a tax at all, nevertheless raises nearly as much as income tax at 100 billion. So any Labour promise not to raise taxes is about as reliable as Gordon Brown's boast that he had abolished boom and bust.

As was Brown's pledge last week that he won't let us down. While most of us might think it is a bit late for such a promise, it's possible he actually believes it. After all, here is a man who has never once admitted any responsibility for any of his actions. He must be a statistical anomaly as the only major deficit with a zero rating for regret risk.

Back in the real world, most commentators are sceptical of the government's forecasts for growth, without which their numbers do not add up. But my guess is that, should Labour make it back to Downing Street, there will be an old-fashioned run on the pound, which will force up borrowing and interest rates.

Sterling didn't tank recently because of fears of a hung parliament. What's there to be frightened of in Vince Cable as Chancellor, or a senior member of the Treasury? Not when you consider the alternatives of Ed Balls or George Osborne.

No. Sterling traders ran for the little boys' room when polls indicated Brown could return as Prime Minister.

Poor Alistair Darling. He gives every impression of being a decent man trying to do a decent job. Yet Ed Balls is after his job and, until recently, Darling had to suffer Balls' wife Yvette Cooper as a senior member of his team. Now he's got Bryne spouting the Holy Gospel according to Brown at every opportunity. How he must look forward to that Monday morning train south.

Captive watchdogs

THE other technical term I came across at the conference was "regulatory capture". While this conjures up images of financial policemen slapping handcuffs on villains, it in fact means the reverse.

It refers to when the regulators get captured by those they are supposed to be policing, and see everything through their eyes.

This, or so the consensus has it, is how we landed in the mess we are in today.

So while, in theory, I support the new committee set up by watchdogs to improve consumer protection, I don't have any confidence it will prove effective. Committees tend to be stuffed with career types, with a talent for never rocking the boat. Childlike, they wish to please.

Which brings us on to accountants. While bankers, regulators and politicians have been pilloried for the financial crisis, accountants have escaped.

Yet if you look at the accounts of major banks in the run up to the credit crunch, there is scarcely a word about the vast shadow banking empires they were running.

No wonder the storm took us all by surprise. Now a report into the collapse of Lehman's has found accounting tricks and "actionable balance sheet manipulation". Auditor Ernst & Young says its last audit was "fairly presented". That's another technical term, which can be judged in the same context as a "future fair for all" offered by Labour.