Professor Philip Lane:

I assure the Deputy that central banks globally are paying a lot of attention to these issues. Apart from the wider issues referred to by the Deputy, there is a clear feedback to financial stability and we need to pay attention to issues where there are consequential developments such as Brexit and the issues that lie behind that. It is also important to go through the individual issues and determine which are relevant to the issue in question. Issues such as the future of work and who will win and lose from automation or from globalisation are very important, even from a macroeconomic point of view. The consumption profiles of those on middle and lower wages are very different from the profiles of the top 1% and this shift in income is a big part of what is going on in the world economy and has consequences for the levels of demand in the world.

On the land issue, it is important to ask who is taking the risk of speculating on high land prices. In the mid-2000s the risk was, unfortunately, taken by the taxpayer when the Government stepped in after banks had made excessively risky loans, which had been funded by our deposits and bonds. It is quite different when it is a global investment fund. The risk profile of what we are seeing now is very different from then. In a world of super-low interest rates, buying a property with a rental yield looks more attractive than holding a bond or a bank deposit. This is basic economics but it is very important that we prevent the banking system from taking excessive commercial real estate risk and this is also the case across Europe. We are putting a lot of emphasis on making sure the risks in commercial real estate are not concentrated in banks.

There was a political source of the cap on pay and the question is how we explain lifting that cap in the context of inequality and the beliefs of typical people. It is also a big issue in the Netherlands and there are complex relationships between the sources of inequality, with crisis sources on one hand and automation and big tech on the other. The issues go much wider than the financial system. Globally, a lot of new fortunes are being made in the technology sector and the popularity of banking as compared with technology as a career has moved a lot in recent times.

There is a wider agenda than just the banking system.