The Governor's Eyebrow


Apologies for stealing the headline to this interesting Matthew Parris piece. He's pondering upon the difference between rules based regulation and judgement based. For example, was the earlier system when the governor of the Bank of England could simply raise an eyebrow and an activity would stop better than the current FSA system of rules....leading to box ticking rather than a consideration of the underlying reality of said activity.

In this instance I find myself agreeing that the eyebrow system works better. Yet Parris goes on to another example: wouldn't a tax system that depended upon HMCR simply saying "Oi! That's not on!" be better than a rules based, box ticking one. And I find myself disagreeing.

Which leads to something of a conundrum. If judgement, the eyebrow, is better sometimes than the strict interpretation of the written down rules and yet at other times the reverse is true, is there any sort of sorting mechanism that we can have to work out when for which? Erm, a rule as to when to use judgement or a judgement as to when to use rules as it were?

I don't claim that this is the final word and would welcome comments which would help sharpen this up. But I would say that judgement is correct when we're talking about a voluntary activity and rules when we're talking about the power of the State over us.

Being in the City, being able to rely upon the Bank of England as the lender of last resort, as an example, is a choice made by your business model. I see no problem with that meaning that you've also accepted the judgement based control of your activities as a quid pro quo. To use a sporting analogy, by agreeing to play the game of rugby you've accepted that the referee has the last word and can indeed send you off for anything he likes and no arguing.

However, how we are taxed is not voluntary. This is something imposed upon us by the State and at this point we want to know exactly what the rules are, in detail, in advance. Thus we need to have a rules based system,. the legislation which we can all read and understand (well, if tax law was in fact comprehensible by ordinary mortals).

To use another analogy, that of the criminal law. I want to know what is legal and what is not in advance. I don't want myself (or anyone else) to be dragged off the street and incarcerated just because someone has judged that I am a bad 'un. I've done what that is illegal? And how have you proven this and have you ticked all those boxes of evidence, trial, jury, of justice?

As I say I'd appreciate some help fleshing this out but I'd say judgement is appropriate when we voluntarily submit and rules when we are forced to.