Merlin’s cheap tricks
Civitas, 10 February 2011
Perhaps it was inevitable I should write about a namesake, albeit a bit of a black sheep. The surreally named Project Merlin, months in the making, has failed to deliver – it pulled in too many directions at once. The Government attempted to play ‘whack-a-mole’ with the banks, and deal with the twin issues of lending and bonuses and it missed too many opportunities by focusing on unconstructive ‘banker bashing’ rather than positive banking reform.
Like the wayward student activist who becomes a banker, Project Merlin had so much promise. It was a clean slate, a chance to really change the landscape of the financial world. The Government could have used it as an occasion to fully unplug the squeeze on lending by engaging in substantial financial reform. Local banks or an industrial bank are both viable solutions to the mess the status quo created and both should have been seriously considered. Of course, there is no reason they still shouldn’t be, but Project Merlin would have been perfect for dabbling in ‘blue sky thinking’.
Currently, many highly successful SMEs are continuing to be starved of the funds they badly need to grow. The small advancements each of these could undergo with proper loans would enlarge the economy as a whole and benefit everyone in the process. This is the real priority and the Government knows it, saying so in their Growth Review. Retribution for the bankers’ mistakes made two years ago, while perhaps karmic, do not help us in the present.
The focus on bonuses was a kowtow to public opinion and an entirely misplaced one. The Government should have been brave enough to ignore bonuses and concentrate on maximising lending rather than diluting its message. Winning cheap political points should not have been the point of Project Merlin. The bonuses issue could have been dealt with at a later time. Perhaps two ‘Projects’, each dealing with the separate concerns would have been the best approach.
The Government also misjudged the strength of opinion on bonuses – many people are only angry at the large pay-outs because lending is so tight. If loans for individuals and businesses were easier to come by, banker salaries would be less of an issue. Hence, solely gaining concessions on borrowing, provided they were substantial, would have been far more welcome by all. Project Merlin should have been about attacking the root of the problem, not the symptoms.
The preoccupation has now created an outcome that few are happy with. Government compromised and everyone walked away feeling cheated – the outcome feels a bit tokenistic on all counts. Really, they need to start again from scratch and consider revolution rather than evolution.