Risk and reward

Writing my tribute to the late John Prescott last year, I never did explain why the then deputy prime minister stood on the steps of the Guildhall in Hull, alongside the City’s two other MPs, Alan Johnson and Diana Johnson, and numerous protesters, calling for my censure. So here it is.

I closed a dog racing track. It’s a long story.

The short version. It was a council-owned site, and I ordered its repossession, shutting it down and locking it up on safety grounds. It had been the old home of Hull FC, one of the city’s two rugby league teams, but the place was falling apart. The leaseholders had neglected it for years; the roof was literally coming off the New Stand. The public safety risks of keeping it open were too much.

The leaseholders were said to have links to the late Ken Richardson, a businessman jailed for conspiracy to commit arson and fraud – an attempt to burn down Doncaster Rovers’ ground in the ’90s. There were also plenty of rumours, let’s just say, about the moral probity of some of the other characters involved.

Closing a dog racing track where large sums of money changed hands, in races of questionable integrity, was with hindsight a brave thing to do. It certainly made me unpopular in many quarters. I received all sorts of threats – of the suggestions of violence from anonymous callers variety.

At public meetings in the Boulevard (the name of the ground and the surrounding area in Hull), the hostility was open and sometimes violent. My one saving grace was that my family was originally from the area (it’s the old fishing folk’s neck of the woods), and I was a boyhood Hull FC fan.

John, Alan and Diana fronted a campaign to have me censured for harming the welfare of greyhounds. The owners claimed the dogs would be put down now that they had nowhere to race. Apparently, that was all my fault. I can’t say with certainty, but I suspect John and his colleagues weren’t really concerned about greyhound welfare – it was simply a tactic to undermine our minority administration. Politics is a grubby business up north.

Why mention this now? To explain that I do understand how tough it is being a local politician. Many are just trying to do their best in difficult circumstances.

Public reactions to reasonable decisions can be unreasonably harsh. Tensions run high. People say and threaten things they shouldn’t – especially online, where things get incredibly feral. Mind it seems being a columnist is also quite fraught nowadays. Just last week, I was abused online for the crime of just suggesting that Horace had written a good column.

The reaction he received personally was eye-opening. I thought his analysis was reasoned and rational. In fact, I had heard similar views expressed over dinner the previous week from a respected UK-based fund manager. But given the outrage, you’d think Horace had called for the compulsory euthanasia of every second locally born child.

Recently, Richard Digard suggested in these pages that I was removed from the Fiscal Policy Panel for speaking the truth about our public finances – or rather, about politicians’ inaction on them. I have never commented publicly, but I will say this: I do not believe good governance or due process was followed in removing me, and I objected privately at the time.

Healthy political debate is essential in a democracy. People must be able to speak freely. That includes tolerance for legitimate criticism, room for gentle ridicule, satire, and yes, even calling out incompetence. After all, our livelihoods are at stake. The consensus is that our political system is already largely unaccountable. If we start using the powers of the state or its agencies to suppress public criticism, it’s a very, very slippery slope.

Continuing this serious tone (my topics are always serious, even if my tone is sometimes irreverent), I promised the editor I’d touch on Moneyval this month. Awkward segue, I know, but frankness is needed. I’ve written before about my involvement in the decision to join Moneyval when I was in the States. I was at the GFSC for Moneyval’s 2014 visit (I just missed the IMF’s visit but was involved in the follow-up), and this time around, I experienced the process from the finance sector’s perspective. I wasn’t personally interviewed, but one of the firms where I’m a non-exec was.

First things first, it was a positive result. And credit where it’s due – the GFSC’s outreach to the finance sector was excellent, and the level of preparedness was exemplary. That said, and here I find myself agreeing with Deputy Trott, there were areas where our preparation left a bit to be desired. If memory serves correctly, we were still making final legal amendments as the Moneyval delegation was here. Moreover, it’s not good for us to consume so much policy bandwidth solely on a Moneyval assessment. The opportunity cost is too high. In my opinion naturally.

But to be fair, the assessment process is inherently asymmetric – the upside is limited, but the downside is huge. Given the risk aversion in the public sector (understandable, even expected), it’s no surprise that there’s a tendency to go the extra mile.

But back to the substantive point – our result. It was excellent, indeed, it doesn’t get much better than that. We’ve followed up our third-round assessment (which gave us the ‘highest rating on the planet’) with an ‘only jurisdiction assessed to be fully technically compliant’ verdict. So we’re managing to clear that bar quite substantially. Let’s set aside the lack of criminal prosecutions for today. Some of that is down to the lack of such activity. It’s not all a case of a lack of resources.

I posted on LinkedIn – where I keep my corporate commentary – simply: ‘Well, the final Moneyval report is out, and with more highly effectives than France and the UK combined, plus a pleasing substantially effective for legal persons and arrangements, the results confirm what we’ve been saying for the last 15 years (while making ourselves hoarse in the process): Guernsey is a well-regulated, tax-transparent regime. Move along.’

The messaging was designed for external audiences. I have no interest in tempering a positive Guernsey message on LinkedIn. It was also important to be clear that the assessment affirms what we’ve been saying for years. The deliberately matter-of-fact tone was queried in the GP leader column, but it was loved online, and I kid you not, people stopped me in the Pollet to thank me for it.

If where we are now is important, where we go next is critical. And here, I counsel caution. We’ve got a good assessment, better than most. The Moneyval report itself states: ‘Most material sectors show a strong understanding of their specific ML risks and regularly conduct and update business and customer risk assessments.’

Frankly, where do we really need to go from here? We should take a pragmatic, cautious approach to implementing any of the recommendations.

I have previously highlighted the economic cost of our compliance culture – some argue it’s an over-compliance culture. Passing Moneyval is, as economists say, a necessary and sufficient condition for economic success. However, risk aversion is not. For me, one of the most insightful comments in the report went as follows: ‘The application of AML/CFT measures is proportionate to risks across all sectors, with a stable or decreasing risk appetite, particularly in banks and TCSPs.’ My emphasis.

This risk aversion is a significant source of our economic problems. Importantly, and perhaps more urgently than preparing for the next Moneyval assessment, we need to address this. I just hope saying so doesn’t make me the target of more doorstep protests.