It was never in doubt that the Treasury select committee would back Andrew Bailey’s appointment as the next governor of the Bank of England, but the man himself will have hoped for more enthusiasm.
Instead, he got a “yes, but …” verdict, with the ugly phrase “serious concerns” applied to the performance of the Financial Conduct Authority (FCA) under his stewardship. Committee chair Mel Stride might as well have shrugged and said: “He’ll do, I suppose.”
The case for Bailey’s defence is that no boss of the FCA, or its predecessor body, had ever emerged with a pristine record. Even so, a lot happened on his watch – and campaigner Gina Miller reckoned she had a full “damning dossier”.
The gating of Neil Woodford’s funds generated the most headlines, but the more obvious regulatory failure was the collapse of mini-bond issuer London Capital & Finance, where it will be a miracle, or a stitch-up, if the official inquiry does not find the FCA to have been asleep. Then there was the failure of Lendy, the peer-to-peer loans platform, a new industry and thus one where regulators should police every corner.
It would be wrong to say Bailey is returning to the Bank with less than full authority – perceptions change once a governor is in office. But he could do with getting off to a flyer.
Flybe’s collapse is the simple bit
The easy part for the government was refusing Flybe’s request for a £100m loan.
The Connect consortium that owned Flybe – a combo of Virgin Atlantic, Stobart Air and US hedge fund Cyrus Capital – had only wooly investment intentions. It was puzzling how the terms of any loan could qualify as “commercial” if no commercial lender was willing to step in. The spread of the coronavirus might quickly have made £100m an inadequate sticking-plaster, as argued here on Thursday. Ministers had little choice.
But there is still a big job to be done – minimising the fallout from Flybe’s failure. On that score, the new aviation minister, Kelly Tolhurst, came to the Commons bearing only good intentions. The government “stands ready” to help regional airport and regional connectivity, she said.
Come on, the government has had seven weeks to prepare for Flybe’s demise. Many routes will be picked up by other airlines, but not all. By now one would expect ministers to have decided which of the marginal routes will be protected via public service obligation subsidies, as already applied to Flybe’s London-Newquay operation.
Details, it seems, will follow in the “regional air connectivity review” that was commissioned in January. The government needs to step up the pace. There is an obvious danger of a domino effect in which regional airports are thrown into financial crisis after the disappearance of their largest customer.
The way to address that threat is not by “standing ready” – it’s by making some decisions, sharpish.
New John Lewis boss makes her mark
Sharon White got three things right in her debut as chairman of the John Lewis Partnership.
First, staff got a bonus worth 2% of salary. The payment is a token, but zero would have signalled panic in the boardroom. No bonus would also have been “dangerously demotivating” at Waitrose, as independent analyst Nick Bubb put it, since the supermarket side fared OK last year.
Second, White offered a long-term perspective on John Lewis’ woes. The partnership has two well-regarded brands, it made an overall profit of £123m last year and its debt ratio improved. Things could be worse.
The problem, though, is that it’s easy to imagine how the position could deteriorate. Last year was the third year in a row in which profits declined. The business plainly has too much physical space. Some of the department stores look tired and Waitrose loses its Ocado tie-up in September.
Thus the third item White called correctly was to hint at radicalism in her strategic review. “Right sizing” is management guff, but, if it’s meant to convey the inevitability of closures and job losses, fair enough: shutting two or three small Waitroses a year is no longer going to cut it.
White is also prepared to contemplate the heresy of dropping the “never knowingly undersold” price promise. A few partners and customers may be shocked, but there must be a point at which it makes no commercial sense to match every competitors’ promotion while simultaneously offering superior service.
White’s reforms will be judged by results, but a dose of cold realism, which is what she offered on Thursday, was a promising start.
