Everyone knew that David Cameron had to reposition the Conservative Party after becoming leader – in particular to dispel the idea that the Tories were stooges for big business. They appear to be taking this too far, however, with George Osborne’s plans to abolish the Financial Services Authority and give greater powers to the Bank of England (which, as I pointed out in an early blog, performed very badly in the early days of the credit crunch, and was probably responsible for the run on Northern Rock).

A series of business and City heavyweights have issued thinly veiled attacks on the proposal. Richard Lambert, CBI director general, said: “This is a very radical blueprint. The Conservative proposals would give the Bank of England the most wide-ranging powers of any central bank in the major economies. What most concerns business is what regulators do, rather than where they sit, and lots of big questions remain unanswered in these proposals…” That’s the CBI equivalent of Sir Humphrey telling Jim Hacker that his plans were “courageous”.

Two City heavyweights have since written guest columns in the Financial Times apparently welcoming the plans, but in practice rubbishing them by suggesting changes that would leave the FSA in place. They were Andrew Large, former Deputy Governor of the Bank of England, and Sir Martin Jacomb, a former Barclays chief from years ago and one of the wisest birds in the City. Both questioned the wisdom of another upheaval in financial regulation.

Perhaps the most worrying aspect about the Osborne plan is that it appears to be a Gordon Brown-type initiative. Its main attraction for the Shadow Chancellor is to embarrass Brown who created the FSA – just as Brown introduced the 50p rate of tax which will raise little or no cash because it challenged the Tories to say they would abolish it.

But such opportunistic initiatives have costs. Brown’s tax rise will have an impact on entrepreneurs and on wealthy people who will decide to relocate to more welcoming tax regimes. Bank regulation, meanwhile, will be frozen over the next three years at a time when important measures have to be implemented. The FSA will suffer a brain drain before the election, and the remaining staff will then spend two years creating a new structure and finding offices to use. Britain will be the loser.

Showing you are not in business’s pocket is one thing. Actively adopting policies that damage the economy to score a tactical point is another. George Osborne does not have a stellar record as Shadow Chancellor and needs to get his act together.

John Willman is an award winning journalist. An economic commentator, author and former Associate Editor of the Financial Times. For more information or to contact John Willman, click here.

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