What went wrong with the regulation of household credit before the financial crisis?

The Labour Party's 1997 manifesto said "we will reject the boom and bust policies which caused the collapse of the housing market." As Chancellor, Gordon Brown presided over a decade of uninterrupted consecutive quarters of economic growth only for this to end with the global financial crisis when he finally became Prime Minister.

Various theories have been put forward for explaining New Labour's approach to regulating household credit, both amongst academics and in the political sphere. One is that New Labour pursued an essentially deregulatory approach to household credit and the banking industry more generally. Another theory is that, while New Labour did introduce significant regulation of household credit and the banks, this was primarily, or at least in large part, about "market building". That is, creating the regulatory framework required to support a market in household credit, rather than focussing on other aims such as consumer protection or micro or macro financial stability. Finally, it can be argued that New Labour did attempt to appropriately regulate the household credit market, including in relation to consumer protection and micro/macro financial stability but came up short. 

Tomorrow, at the London School of Economics, I will be giving a presentation to evaluate, in turn, how the three theories - deregulation, market building and inadequate regulation – explain New Labour's approach to the regulation of household credit. Professor David Kershaw will be chairing the event.

More details about the event are available here and you can register for the event by clicking here.