On the Lobby-Go-Round

Glen Newey

In a letter to his constituents published in the Spectator during the 1975 referendum campaign on the UK's membership of the Common Market, Tony Benn outlined five 'basic democratic rights' that were 'fundamentally altered by Britain’s membership of the European Community'. The fifth of them was the right of citizens to dismiss our political masters. As the European Commission president, Jean-Claude Juncker, put it last year, 'there can be no democratic choice against the European treaties.' Nowhere is this more obvious than in Juncker's Commission, the body that governs EU affairs without needing a parliamentary majority. Effective power devolves on the commission and Brussels's smoothly oiled lobby-go-round.

Commissioners are nominated, one per member state, by government leaders. Often, as with Neil Kinnock and Roy Jenkins, they are clapped-out politicos. Others, such as Lord Hill of Oareford, the current UK commissioner, were never elected to start with. Hill and David Cameron worked together for John Major's government. In 1998, Hill co-founded the PR and lobbying firm Quiller Consultants; clients with government contracts include PricewaterhouseCoopers and the 'welfare to work' contractors A4e.

Given a peerage by David Cameron in May 2010, Hill became an education minister and oversaw the sell-off of a Cornish school's playing fields to Tesco, a Quiller client (Quiller was taken over by Huntsworth in 2006, but Hill retained an undisclosed stake). 'The proposed development would significantly enhance the learning experience of the pupils at the Academy,' he wrote. Lobbying is always easier if you can sit on both sides of the table.

Since 2014, Hill has been the commissioner for Financial Stability, Financial Services and Capital Markets Union. The portfolio's a biggie, as the EU plans to integrate capital markets across the union by 2019. Part of the idea is to expand investment vehicles for business to free up bank capital for small firms and personal loans. Hill was no sooner in post than he put out a green paper on the deregulation of Europe's capital markets: 'We want to get the market for high quality securitisation going again in Europe,' he said. A commission 'fact sheet' from last year manages to avoid referring at all to the part played by securitised sub-prime loans in the 2008 crash, even though the formula for bond creation – fractionalising bundles of loans on a risk-graded basis – remains the same.

'Lots of brainy people', Hill said, 'think it is possible to come up with a framework that will be more transparent, and more stable and enable people to see more clearly where the risk is.' Hill and the commission seem blithely confident that a risk assessment regime can be put in place, its spectacular failure before the crash notwithstanding. In a speech in March, Hill called for 'reduced bank capital requirements for securitisations'. No doubt brainy people in Hill's 'cabinet' are busy devising a plan for neutralising asset toxicity in the coming period.

Between December 2014 and March this year, in his capacity as commissioner, Hill held more than 160 meetings with lobbyists, including such players as HSBC, Goldman Sachs and the British Bankers' Association, as well as the Association for Financial Markets in Europe (AFME), a lobbying group which spends around €7 million annually (in total the UK finance sector spends at least €34 million on EU lobbying). The ostensible goal is to diversify investment by reducing European firms' reliance on bank capital rather than equity financing, but the underlying agenda seems to be to facilitate high-risk investment. As the AFME's chief executive Simon Lewis puts it, the goal is 'to foster a stronger culture of responsible risk-taking'; Lewis deplores European 'risk aversion' and the lack of openings for venture capitalists compared with the US.

The finance sector is but one head of the European lobbying hydra, with about 2500 organisations and 15,000 individuals active in Brussels. The European Round Table of Industrialists drafts prospectuses that the Commission has on occasion adopted more or less wholesale, as with the Trans-European Networks infrastructure project.

Before he was elected in 2010, David Cameron said that corporate lobbying was 'the next big scandal waiting to happen'. He was talking about corporate pressure on MPs at Westminster. But, as Benn would have said, at least we can throw them out.


  • 14 June 2016 at 4:54pm
    streetsj says:
    There's nothing wrong with securitisations per se. They are perfectly sensible financial instruments that have some usefulness.
    Don't disagree with the rest of it..

    • 14 June 2016 at 6:05pm
      Graucho says: @ streetsj
      Nothing wrong with securitisation as long as the underlying assets are completely transparent and have been rated with due diligence. When it comes to pooling risk, as was observed after the 2008 debacle, you may get away with blending a glass of vin ordinaire with a barrel of chateau cru, but it won't work with a glass of sewerage. Mind, in 2008 many of the securitisations were a glass of vin ordinaire and a barrel of the brown stuff. The real Achilles heel in the whole business is the vested interest of the ratings agencies to give rosy ratings for fear of losing valuable custom. I have seen no reform that will circumvent this.

    • 15 June 2016 at 12:39pm
      Alan Benfield says: @ Graucho
      Quite so. But, in fact, the sort of securitisation which brought the world's economy close to collapse in 2008 was actually intended to dissipate risk - if used in the right way. What the creators (at J.P. Morgan) didn't anticipate was that, if used in the 'wrong' way it could have the reverse effect, while at the same time obscuring the amount of risk involved. Add to this the fraudulent selling of 'NINJA' and 'Liar' loans pushed by unscrupulous mortgage brokers and the perfect storm was created.

      For details read Gillian Tett's excellent book "Fool's Gold" (reviewed by Donald MacKenzie in LRB of 25 June).

      And don't get me started on Credit Default Swaps...

    • 15 June 2016 at 2:59pm
      Alan Benfield says: @ Alan Benfield
      Sorry, that was, of course 25 June 2009 (forgot to type the year, doh!)

    • 27 June 2016 at 10:10am
      amd says: @ Alan Benfield
      This article is laughably simplistic. Commission talking to industry = bad. Well done, you've managed to come up with an argument that only a first year undergraduate would be proud of. The Commission naturally consults with industry before legislating. Because guess what, the Commission is staffed by civil servants who won't always know the exact minutiae of how certain industries function. But guess what again, it also consults with regulatory bodies all across EU as well, like the European Banking Authority(EBA) and ECB. And low and behold, it just so happens that the EBA produced advice to the Commission last summer on simple, standard and transparent securitisations which has basically been copied and pasted into the legislative proposals. So in a nutshell, these rules have ACTUALLY been written by regulators, not greedy lobbyists out to subvert the public good. So your article has about the same academic rigour as a Daily a Mail editorial castigating immigrants. It's lazy analysis like this that is slowly eroding people's confidence in democratic and public institutions. We are in extremely dangerous times. Those of us who have had the opportunity to receive high levels of education should be exercising that privilege with more responsibility.

  • 14 June 2016 at 8:01pm
    davidnoelgardner says:
    Participatory democracy as in Switzerland is the only way to institute any democratic participation in Britain. It is easy indeed to say that the system of democratic participation in Switzerland a tiny nation is out of question in Britain. However, democratic processes do need to evolve away from the firm hold the top brass of all political parties have on what is voted for in the British Parliament. As an active member of one political party in Britain I know that local branches and grass roots party member have zilch say in any policy held arrogantly close their elitist selves by the parliamentary cliques of all political parties in Britain. Why else would the basic fundamental framework of what controls the lives of the majority citizens, housing, health, children's education and further education, fairness, tenancy laws that protect the tenant and community building, the very foundations of a 21st century developed nation, are expunged from life in Britain, tragically and made into a profit loss investment sheet, with tax and other corrupt infusions from across the world legalized.
    Participatory democracy alone is where citizens will once again be called upon to participate in policy and the cutting edge laws that govern their economy and taxation and home and community buildings and public and national safety.
    Britain now has been sold off by successive Conservative, Labour and Lib Dem Governments to the most virulently destructive forces of capitalism, and the majority of British citizens are treated like the mass disenfranchised lumpen lot as it was always historially the sad fact in Britain except for the short period of time after the Second World war.
    The EU is controlled by nations and interests as this writer has shown, untrammelled economic and political power that has wrought disgraceful suffering in the vulgar "austerity" word that stands for "evil" and "suffering" and disgrace in Britain and the EU.
    Paritcipatory democracy will alone bring in the grass roots fairness and awareness and enlightenment values dangerously and totally off the British and EU landscape now.
    And Britain will do this only if out of the mad clasp of the undemocratic, mad, greedy, corrupt and deceitful management of the EU by the few once again in Europe, Merkel and Germany and those she appoints to do her bidding. Britain does not stand any chance to influence or lead therein and Merkel and all others know that fully well.
    Britain has to leave the EU and build democracy within to have peace and security and a stable nation.

  • 14 June 2016 at 9:27pm
    simonpawley says:
    Representative politics often comes down to choosing the least worst option, and even in a referendum attention must be paid to the context. Benn's objections are sound and I'm just about willing to say that the EU might not be 'reformable' in any satisfactory way. All the same, leaving now would mean the political elevation of Boris Johnson (PM), Michael Gove (Chancellor), and IDS, Liam Fox and Priti Patel to senior cabinet positions. It would also cement Ukip as a serious political force. The question of EU membership might seem to be on a different plane to the day-to-day domestic political tussle. But the damage that lot would do in the next 9 years would be no less irreversible than what would be inflicted by the European commission. And that applies in spades to London's status as a nexus of deregulated financial speculation.

    • 15 June 2016 at 10:27am
      davidnoelgardner says: @ simonpawley
      The Conservative Party and UKIP were voted for by a small percentage of the voters in the UK ie Scotland, Wales, Northern Ireland and England together.
      One political party and one block of it will be unable to hold all power and keep a tenacious hold when their base is seriously fractured from within their own political party as in the Conservatives now.
      Boris etc running Britain unendingly painted as the greater fear and risk than the Merkel and German dominated EU with their ongoing savaging of the poorer EU nations and the yet to come vast compounding of terror and breakdown of the EU democracy and sovereignty and peace that they have wrought by the grab allowed by reckless default by the weak and easily bullied EU nations once again and the weak Chamberlainesque British failure and lies once again as in Cameron and Osborne.
      Day after 23 June if Britain votes to Remain, Merkel will be out in full colours and splendour and the wreckage and onslaught will be uncontrollable and untrammelled.
      What has transpired in the last few years in the EU can bring nothing other than this totally predictable menace, horror, reality and consequence.
      On the EU continental mainland, most silently know there will be war in Europe, the breakdown of the Rule of Law and democratic governance is so massive, especially since the ongoing earthquake Merkel triggered in 2015 that all can see will for certain get much more violent and destructive, yes once again in Europe.
      Boris can and will be replaced, Merkel and Germany in undemocratic control of the EU to do as now, as they bully, decide and diktat, is outside of any and all democratic controls and processes in the EU and will be sealed as Britain's horrific fate once again.
      And this from one who was an avowed believer and dyed in the wool supporter of the EU.

    • 15 June 2016 at 2:55pm
      Alan Benfield says: @ davidnoelgardner
      "On the EU continental mainland, most silently know there will be war in Europe, the breakdown of the Rule of Law and democratic governance is so massive"

      Yes, here in Den Haag it's all we talk about: total strangers stop one another on the street and crowds gather spontaneously on corners to look anxiously Eastward for the storm clouds of war massing on the horizon.

      With the greatest respect, your foam-flecked (yes, I know I have said it before) apocalyptic visions are becoming a little tiresome, based upon, apparently, little first-hand knowledge of what life is really like on the "EU continental mainland" [sic]. I don't know where you glean your information from, but a little social unrest does not make this a repeat of 1848.

      "Weak and easily bullied EU nations"? What, like Hungary and Poland at the moment (whose attitude is basically "Refugees? Sod off.")? Or the Austrians, threatening to unilaterally close the border with Italy (and sod the Schengen agreement)? Are you serious? The EU members states are at present a pretty fractious bunch, particularly in the East. Weak they are not. Interestingly, though, you don't hear much from Italy or Spain: the Italians just seem to be getting on with the hard work of dealing with refugees, quietly and without making a fuss, expecting no thanks in return - exactly what they get.

      Perhaps you could dial it down a bit? Or at least back up your assertions with a bit of good old LRB analysis?

    • 15 June 2016 at 3:13pm
      Alan Benfield says: @ Alan Benfield
      Oh, yes, and EVIDENCE...

    • 15 June 2016 at 6:47pm
      Timothy Rogers says: @ davidnoelgardner
      I really don't get the Merkel savaging - it's disproportionate, apolitical, and ahistorical as well. Remember our balmy youth (sometime between 1945 and 1965). WWII had solved "the German problem", though the DBR and DDR as "rival states" still contributed to the cold-war willies and though Berlin was the rhetorical focus of a threatened "apocalyptic showdown" (savvy politicians on both sides of the line understood that the Berlin wall was a passable solution, not a problem). The gist of what the wise old heads said about all this was, "Well, after the excitements of 1870-1945, when the drive for German hegemony of the continent produced nothing but disaster for all of us, wouldn't it be nice if the Germans calmed down, lowered the political temperature in their own country, and devoted themselves to what they do so well: manufacturing, construction, and yes, even scholarship." Which is more or less what happened. Compared to the bad old days any dissatisfaction with Merkel's leadership, which has to react to the politically inevitable backlash of German voters over having been hosed by their fiscal client states, seems to be a tempest in a very small teacup ("Go ask the Greeks about that" is a very weak response -- in the period alluded to after beating themselves up during the interwar era they suffered a brutal invasion and occupation, followed by a bloody and equally brutal civil war - do their current problems compare in any way to this?). Calm down about this nice old lady who knows a thing or two about living in a self-divided Europe.

    • 16 June 2016 at 10:16am
      Alan Benfield says: @ Timothy Rogers
      Have to disagree with you just a little there. While I agree that dng's remarks (about most things!) are intemperate, Merkel does deserve sharp criticism on at least two points:

      1. "the politically inevitable backlash of German voters over having been hosed by their fiscal client states" - as I have pointed out elsewhere in the LRB blog (more than once), there was nothing politically inevitable about Germany's response to the Greek debt crisis. German voters were not being "hosed" by Greece until Merkel (prompted by Schäuble, no doubt) took over debt owed by Greece to German banks, notably Deutsche. Until then it was a simple scenario of profligate banks* lending to unreliable borrowers. Merkel and Schäuble made it first a German and then an EU issue, adopting the spurious moral high ground and developing the bogus scenario of thrifty German savers being rooked by devious and spendthrift Greeks. This was and remains an abuse of Germany's position in the EU.

      2. In once again adopting a high moral tone about the refugee issue ("Wir schaffen das"), Merkel exacerbated popular objections to the refugee crisis, rather than producing any real solution to it. I am sure she thought to provide moral leadership, but grandstanding is no substitute for the hard work of diplomacy. Furthermore, the idea that you can shame, say, Viktor Orbán into doing the right thing is pretty laughable. Donald Trump may talk about building walls, but the man that Hungarians (admiringly!) call "The Viktator" has already built 4 metre high razor wire fences along his country's borders with Croatia and Slovenia.

      Perhaps this 'nice old lady' is losing her touch?

      *Let us also remember at this point that Greece only originally acceded to the Eurozone by fiddling the books - with the aid of Goldman Sachs - giving her the financial street cred to borrow all that dosh in the first place.

  • 16 June 2016 at 6:59am
    davidnoelgardner says:
    Historical realities in living memory and present day realities evidence that Germany has and will dominate the agenda in Europe.
    Britain has been unable to contain Germany in any diplomatic, treaty, "mutuality" discourse and balance. See Chamberlain and pre First World War containment sans any "sitting down at the table" by Britain and Germany.
    Britain has only contained Germany after the brutal loss of millions of lives and two World Wars all in the most gruesome and living memory.
    Britain is the English speaking nation in the EU where disproportionate numbers desire to enter as the stepping stone to the USA. Britain unlike all other EU nations is id free, so once in, an open door to access. In most EU nations id control is paramount, in place for everything whatever the exchange, and so inflows from other EU nations is hugely controlled and manageable.
    Access to all social services is dependent on that national id which has to be current and ratified regualrly to be acceptable for everything from visiting the doctor, the emergency services, the library, almost all commercial transactions.
    Even national citizens have to turn up every few years and have their id picture retaken, the id renewed and validated.
    Britain's internal structures for economic rationality and social services is in such massive disarray and disfunctionality anyway and being the major magnet as the major by far English speaking nation in the EU so that with education and jobs here incomers have access to seek immigration to the USA and to global jobs and life.
    Britain lacks the internal structure for a parallel standing alongside the other EU nations to withstand free movement and open entry because the tools for adequate governance as the major English speaking magnet for 550 millions EU nationals are fundamentally unmanageable and anyway even the basics for such proper governance are totally internally absent here.

    • 16 June 2016 at 10:48am
      Alan Benfield says: @ davidnoelgardner
      I really must get some work done, but equally I really must comment on this post first:

      "Britain is the English speaking nation in the EU where disproportionate numbers desire to enter as the stepping stone to the USA."

      Is there any evidence for this? If so, perhaps you could point to it?

      "Britain unlike all other EU nations is id free,"

      That may well be true in a sense, but it depends on what you mean. When I lived in Belgium, I was required to carry a national identity card, on pain of a fine. Here in The Netherlands, all those over the age of 14 are required to be able to identify themselves with picture id (which can be a student card, driving licence or other accepted form of id), but there is no formal, compulsory national id card as in Belgium.

      I would also point out that for a migrant to work legally in the UK they have to have (a) a work permit, (b) a residence permit and (c) a National Insurance (social security) number, as is the case in most EU countries.

      Have you actually checked out the systems in all the other 25 EU countries we haven't covered between us?

      "so once in, an open door to access."

      Aha, yes, "once in": the UK has the most stringent entry requirements of any EU country. In any case, every country has its illegals who work cash in hand under the radar and are serviced by a network of people who provide them with housing, etc., usually at a premium.

      "In most EU nations id control is paramount, in place for everything whatever the exchange, and so inflows from other EU nations is hugely controlled and manageable."

      In the countries in which I have lived, this is actually horseshit. If you go to a doctor or hospital here, they will ask for your medical insurance details, because that's how the system works. It is not a form of social control. The indigent, however, are treated free.

      "Access to all social services is dependent on that national id which has to be current and ratified regularly to be acceptable for everything from visiting the doctor, the emergency services, the library, almost all commercial transactions."

      Almost total horseshit, at least here in NL. Every resident has a unique social security number, if they are registered. This is used for voting rights (as in the UK), by the tax system, etc.

      "Even national citizens have to turn up every few years and have their id picture retaken, the id renewed and validated."

      Completely false, except in the sense that, say, my driver's licence, which I most often use as ID requires renewal every ten years.

      It's been a pleasure to set you straight...

  • 16 June 2016 at 7:38am
    cufflink says:
    There has been little or no blog comment on the Euro membership vis a vis the other major trading blocks.
    As a postal voter I have cast my vote to remain, mainly on the basis of a re-invigorated social chapter and the protective guarantee of talking through the financial difficulties as between members that will arise. But the single market, with safeguards as to probity, will succeed by drawing in investment of both supply expertise and new business. There can be no expansion and betterment of the standard of living without this.
    The problem is not the undemocratic set-up of the Commission but the fact that the disparate interests high and low cannot be reconciled to purpose without some form of edicted decision making.
    But we do not want a FIFA Europe so there must be exceptions and opt-outs to see us on to maturity, peace and co-operation.
    Such an idealised view is necessary to put in place peaceful relations between the peoples of Europe.
    But I should nevertheless wish that Glen would join the Commission.

  • 18 June 2016 at 1:51pm
    pgillott says:
    This was a one-off many years ago, and so might be seen as the partial exception which proves the rule, but it seems that the Commission has more or less been thrown out on one occasion. The OUP’s Very Short Introduction to the EU relates that owing to problems with the Commission’s 1996 accounts, the Parliament (which has the power to dismiss the Commission) appointed a committee to investigate, leading to a “devastating report on mismanagement and some cases of corruption”. The Commission resigned as a result. (The same book relates that the Commissioners are required to make a “solemn undertaking” as to their independence of outside interests, on which this piece casts an interesting light.)

    More generally, whilst it’s odd and not particularly encouraging that the Commission has the sole right to initiate legislation, the need for the legislation to be approved by the Council of Ministers and, generally, by Parliament must be a strong, and significantly democratic, influence.

    My inclination has been to vote to remain, for reasons including risk averseness and the value of strong international co-operation in an interconnected world. That inclination is not strengthened by the way the EU works, including what is revealed in this piece.

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