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Why Sants' exit is embarrassing for the Tories

Robert Peston | 17:28 UK time, Tuesday, 9 February 2010

It is perfectly possible to win general elections without the support of the City and the bosses of substantial private-sector companies.

Although it doesn't normally do harm to have the rich and powerful on side - which was certainly the view that Tony Blair took as leader of the opposition Labour Party in 1996 and 1997 with his turbo-charged charm offensive on the grandee class.

So it may not be trivial that the Tories have dazed and confused a fair number of business leaders over the past fortnight.

For what it's worth (and the value of anecdote shouldn't be overstated), the question I am most often asked right now when chatting to the bosses is "have the Tories blown it?"

Which is probably a bit of pre-election hysteria. But probably shouldn't be dismissed by the Conservatives as utterly peripheral to their electoral prospects.

What miffed the more successful capitalists was what they saw as David Cameron's recent softening of the Tories' commitment to take the necessary steps to cut public-sector borrowing.

They felt his previous message - that it must be a new government's top priority to cut the public sector down to an affordable size - had been diluted. They didn't like that.

Hector SantsAnd today they're a bit uneasy about the resignation of Hector Sants as chief executive of the Financial Services Authority - because it is an open secret in the City that he is opposed to the Tories' plan for breaking up the FSA and transferring the supervision and regulation of banks to the Bank of England.

It is not that he's a much loved figure. He would not be seen as a soft touch by senior bankers. If anything, he has a talent for irking them (which is presumably what you would want from someone in his job).

But he is widely seen to be significantly more competent than is the norm for regulators - partly because he has the rare distinction of having had a successful career at the sharp end of investment banking before becoming a gamekeeper (the measure of which is that he never actually needed the money of his regulator's salary).

And it is not good for any political party to be perceived to be snubbed by the competent.

Sants takes the view that dismantling the FSA and enlarging the Bank of England - a pet initiative of the shadow chancellor, George Osborne - is an unnecessary distraction from the imperative of improving the performance of the regulatory body.

Many in the City would agree with him. And even if their credibility isn't what it was in the wake of the credit crunch, the Tory leader and his shadow chancellor would presumably prefer to have them in the tent rather than outside.

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