Why London so resembles 18th Versailles. The danger of an over large and over powerful courtier class.

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When I think of courtiers I always think of the court at Versailles of Louis XIV, a glittering assembly of notables that led 18th century France into ruin and revolution. The courtier in the medieval kingdoms had a role, they were the intermediary between the absolute monarch and the people. They were the conduit between the king and people. If you wanted to access the king it would be through one of the notables at court. These notables would keen the king informed of events in the country so enabling him to effectively react to unfavourable events in the country, forestalling foreign invasion threats. The same notables, as trusted confidents of the king, could be employed in key administrative posts to ensure the effective governance of the country. Under kings such as Richard I, Edward III and Henry V the system worked well. It was the notables who made the personal governance of one man effective. The one flaw in the system was the dependence on personality of the king, a king such as Edward II who chose his courtiers badly could bring the country into chaos. Rule by courtier was perhaps the only effective means of governance in the largely illiterate and divided countries of the medieval era, but in the modern complex society of countries such as late 18th century France, it had become dysfunctional.

The noble courtiers of late 18th century France who demanded and got a monopoly of governance prevented effective governance of that country. Despite their vast wealth they resisted any tax on their wealth, which would have solved the chronic budgetary crisis’s, resulting from a century’s long warfare with most countries in Europe. Not unlike the super wealthy in today’s Britain they demanded exemption from tax on themselves, instead preferring to shift the burden of taxation on to the less well off majority. Courtier governance inevitably failed and the revolution of 1789 initiated a new era of governance. It is to this class of dysfunctional courtier class that the current class of consultants compare.

What they both share in common is the belief in their right to direct government policy and the right to exact a large fee for the privilege of employing them. Possibly the best example of the new courtier class in action can be taken from the privatisation of Royal Mail. Numerous investment banks advised on the privatisation of Royal Mail, luminaries of the financial world such as Goldman Sachs and Lazards. Estimates for the charges made by these banks are £30 million. Not only did the banks profit from the charges made for their financial advice but they also benefitted from being awarded 30% of the initial share offer. Since the banks that advised on the price for the sale of the Royal Mail were also those entitled to the right to buy a significant part of the shares in the newly privatised Royal Mail they were not going to set a share price that would involve them in a loss. One estimate in The Guardian newspaper suggested that these companies made a gain of £28 million on the shares they purchased, in the initial days after the sale. While Lazard’s advised the government that a valuation of £3.3 billion was the right price at which to privatise the Royal Mail another bank J.P. Morgan had suggested a valuation of £10 billion. All that can be said that at a valuation of £3.3 billion the advising banks made a substantial profit.

It is not unfair to suggest that the class of consultants as with the courtiers at Versailles are an expensive hinderance to good governance. Governments have acquiesced in the demands of the various classes of consultants to have an increasingly large say in government policy making. It is impossible to think of a single policy that does not bear the imprint of the various members of the class of financial and political consultants. The construction of HS2 has not started but already millions has been paid to financial consultants on the project. In a written reply to the MP Cheryl Gillan, the Minister for Transport admitted that £253.23 million has already been spent on the project. While no figure is given for the cost of consultant’s fees, it is right to assume that they accounted for a substantial part of the £1/4 billion costs. This is on a project that may never even be started. The 19th ‘railway king’ and fraudster George Hudson, who was responsible for constructing much of the railway system in the middle nineteenth century, at least in return for his thievery left behind at least a 1000 miles of railway. He would if alive today would be admiring of the inventiveness of the way in which the class of consultants can legitimately make rip off the state and yet give so little in exchange for their services.
The aristocrats of the Court of Versailles effectively obstructed any policy measures that were not in their interest so obstructing the effective governance of the country. What happened was bloody revolution in which some members of this class lost their lives and most all their wealth. A dysfunctional group such as the consultant class which acts as an increasing expensive barrier to good governance should not be able to continue to dominate the process of government policy making. However this is to ignore the nature of financial consultancy. Although they are courtiers who dance attendance on the courts of Westminster and Whitehall, unlike the notables at the court of Louis XIV they have real power as they are the financial ‘shakers and movers’ who dominate the contemporary political scene.

The influence of these financial ‘courtiers’ is best seen in the government’s policy towards tax avoidance. Governments have constantly called on the investment bankers for financial advice, including revenue collection. It is hard to avoid the view that much of this advice is self interested. George Osborne recently had a statute put into law which made it much easier to avoid tax. If the business claimed that the money earned in the UK was really revenue earned by a subsidiary company in a tax haven, they could avoid tax on those earnings. What can never be known is when does advise giving slip over into policy making. The relaxed attitude that HMRC has towards tax avoidance by powerful business corporations, suggests that these financial advisers do more than just advise.

Effective governance can only be restored as in 18th France with a political revolution. Such a revolution need not be bloody, it could be a constitutional revolution. A start could be made in the insistence of transparency in government policy making. All these policy decisions that seemingly are designed to be of benefit only to the class of consultants would be open to scrutiny and as such likely to be less damaging to the public interest. This should only be a start what is further needed is a reform of the system of choosing government so independent minded politicians are chosen as our leaders. What is needed is an end to the love affair between Westminster and the City of London.

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