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Taking Stock #8 | Interview with The Rt Hon. the Baroness Susan Kramer

Liberal Democrat Lords Spokesperson (Treasury and Economy)

This week I caught up with Baroness Susan Kramer, a former banker and fund manager who successfully entered politics and served as a Minister under the Cameron/Clegg coalition government, before joining the House of Lords.

Susan is a big advocate for the UK Fintech movement and has done a lot to help the sector become world-leading.

We spent our Taking Stock time covering topics such as:

  • Her personal story of how she became more politically active, eventually quitting the private sector to run as the Liberal Democrat candidate for London Mayor in 2000.
  • Her early involvement in the UK Fintech movement and how she helped build the profile of the industry with Government and the Bank of England.
  • Her views on the key Government interventions during this Covid-19 crisis, including the economic measures from Chancellor Rishi Sunak to help small businesses.
  • Her macro view on what’s on the agenda in the next months and years, and why more entrepreneurs should consider going into politics to fix the big issues the UK will face in the coming decade.

I meet a lot of entrepreneurs who express frustration at our UK politics, so I’m hoping this episode will inspire some to figure out a way how they too can get involved and (with a bit of luck) help steer us through these turbulent times.

Follow The Rt Hon. the Baroness Susan Kramer on Twitter.

Listen to the interview on Spotify:

Photo: Official portrait of Baroness Kramer by © Robert Harris Photography licensed under CC BY 3.0


Anil Stocker:

Hello everyone. And welcome to another episode of Taking Stock. I’m Anil Stocker. I founded the FinTech MarketFinance back in 2011, 2012, and we’ve been helping small businesses since then. One of the biggest highlights of my job is to talk to entrepreneurs, and policymakers, and people who are key figures in the UK FinTech scene. And this week I’m very honored to be speaking with Baroness Susan Kramer, a former banker, who turned MP, went into politics and became the minister of transport in the coalition government, which was pre the Brexit vote. And then also she became a treasury spokesperson. She’s also a life peer in the House of Lords. Welcome to the show, Susan.

The Rt Hon. the Baroness Susan Kramer:

Well, thank you very much. I should say I was an opposition treasury spokesperson as it were, so not a government spokesperson.

Anil Stocker:

So I want to delve in, to start off with because you had a significant career in the private sector before moving into politics, you were in investment banking in the US, and then you started an infrastructure investment company with your husband focused on Europe, Central and Eastern Europe. What was that business about?

The Rt Hon. the Baroness Susan Kramer:

So we saw, and I have to admit my husband was the lead in this, because he was a fluent German speaker and knew Eastern Europe better than I. But we realized that when the Berlin wall came down, and we were there the next weekend, with the kids, chipping our bit off the wall, and going through when we could. When that happened, there was going to be an effector, a finance revolution in Central and Eastern Europe, because so little had been done for so many years, the catch-up on infrastructure, we specialized in transport. We got dragged into a whole series of other fields as well.

The traditional advisors and the traditional investment banks were really looking for large scale projects with very high fees, they wanted things that were at very high probability of closing. We were very happy to go along and work on smaller projects, to work even on big projects that were far less certain, and to act in an advisory role.

So just as many of the FinTechs have made that business by being small and nimble, we made ours by being small and nimble. So that’s how it started. We ended up doing a joint venture with Creditanstalt that was an Austrian bank that was later taken over by Bank Austria. But that was the idea, small, nimble, seize opportunities and fill all those roles that are generally abandoned by the big boys.

Anil Stocker:

Interesting. What prompted you to think at that point, you’ve had a successful career in banking, and in your own company, get into politics. And how do you go about getting into politics at that stage? You didn’t come up through the grassroots, through the traditional ways. How did that happen?

The Rt Hon. the Baroness Susan Kramer:

By accident, and that’s not unusual, quite frankly. I’m not a very good career planner. You may be a good career planner, or others may be, I’m absolutely hopeless at this. I have no idea what I’m going to be doing five years at any time in my life. But I’d always been interested in politics.

So if I go back to my university days, I was president of the Oxford Union, and I’d done a lot of debating. But I left the UK and went to the States. I got married, I married an American. Never became a citizen. So I had a contact with politics, but sort of at an arms length, you might say. So I’ve always been, to some extent, a political animal. And I always think that when you get angry and there is a real problem, if you want to get it solved, you’re eventually going to have to grapple within the political sphere.

I was back living in London. I got angry locally, frankly, about expansion at Heathrow Airport, and decided to go out and do some campaigning. And before I knew it, I found myself involved with the Liberal Democrats is the local political party that shared my views and my sympathies. I very casually filled out some forms to put my name forward, to be approved as an MP candidate. And things kind of went from there. And I was also then in the right place at the right time.

But I suppose the big shift for me, the thing that made politics possible, was the election of the first mayor of London. As Liberal Democrats we’re pretty small party in London, in terms of voting numbers. And I mean, we all knew, but nobody had a possibility of being elected as mayor for the Liberal Democrats. So I found myself with a fairly open field, putting my name forward to be the candidate. What triggered it for me is I got trapped on a Piccadilly line tube train. I was underground for two hours. I came out seething. I’d been working in Eastern Europe to try and upgrade public transport, so here I was, on the most – you’re the wrong age. So dilapidated, so unreliable, breaking down the whole time. I mean, clearly deteriorated before one’s eyes. And I was so angry that I got hold of the forms, put my name in, and ended up as the Lib Dem candidate. And that was an incredibly exciting election.

Again, some people may remember that the Labour Party tore itself in shreds choosing a candidate. And in the end, Ken Livingston ran as an Independent. The Conservative Party ran through candidates almost as if they were munchies. Jeffrey Archer was arrested. They then struggled to find a new candidate. In the end it was Steve Norris. But there were all kinds. It was wonderful. It was like being in the middle of a circus.

And there was lots of attention on the race, because it was going to be the first. We had nine months, hustings up and down London. And I love this city. I mean, I absolutely, passionately love London. And to drive forward change. At that point, we still had a declining population. Transport infrastructure was deteriorating. It was a city that looked shabby, like an old lady that had gone down in the world. And I was absolutely determined to play a really serious role. We also have a lot of problems with youth crime, sort of picked up when I was just very strong and in all of those kinds of areas, to push forward policies for change. So I became addicted, if you like.

Anil Stocker:

And then elected as MP.

The Rt Hon. the Baroness Susan Kramer:

I did become MP in my local area, which happened by pure chance to be a Lib Dem stronghold. I didn’t choose the area, to live in this area. I live in one of the loveliest areas of London. So I was incredibly lucky. You could say the stars come together.

Look, I think if you go into the world, I think politics is a very worthwhile world. And I do wish that many more people with real world and business experience would go into politics. It’s not that you can’t have some career politicians, but the work that we do really requires that experience of knowledge to be in the mix as well. It’s absolutely critical.

And frankly, it’s fallen out of fashion, I think, in a way. But I think it’s crucially important. But you do have to accept when you go into politics that you may get rewarded, and you might not get rewarded. I know brilliant people who’ve worked incredibly hard and got absolutely nowhere. I was lucky. I’m not brilliant, but I did work very hard. And I found myself as an MP. I was incredibly lucky. So you need luck, along with everything else.

Anil Stocker:

Yes, because I meet that a lot of entrepreneurs, founders, here in London, and they’re doing very well in what they’re doing, in their domain, often they have very good ideas. But the idea of going into politics scares many people, or feels very intimidating. They don’t really know how to do it. Are there any practical tips? I know that you had a few big breaks. You were a bit lucky. But looking back on it, is there a formula that might work?

The Rt Hon. the Baroness Susan Kramer:

Well, I think it’s very hard to be an Independent. I honestly think, just the rail politic is there a political party that you feel comfortable with? And if you do, getting involved is the way to test yourself out. And I suppose occasionally, maybe in other parties, but not in ours, you could come in from some very significant background and find yourself at the top of the tree. But most people go out and slog it. When I first joined the Lib Dems, I was all alone for London, partly because I was excited by politics. I didn’t think it was going to lead anywhere. I was in my late forties and did I think I was going to end up as a candidate. You go out to help other people. You work on their campaigns, you’d knock on the doors.

You help people with their leafleting. You join in the policy discussions and whatever else. I immersed myself in my spare time in the work of party politics. I think sometimes people think if you’re part of a party, you somehow go through a sort of brain lobotomy and become an automated and you don’t. This is a mechanism that you found people who think like you to shape the discussion and to shape the thinking. I certainly come from a party where the grassroots does that all the time. Don’t necessarily get it right, but huge impact for the grassroots, really engaging, getting to know people, building that base.

And then when the chance comes to stand for office, there are two things. Really one is, you know yourself if you’ve got something to say, but also other people know if you have something to say. And if you’ll be able to provide that kind of leadership. So you can make opportunities for yourself. I think many people frankly go into it, not intending to do so, but as they become more and more involved and decide, I didn’t put all this time and energy in just to knock on doors and be rebuffed. I put this time and energy because I think these issues and these values have got to have a stronger voice. And so it does propel you forward. Have a tough skin is always advisable as well.

Anil Stocker:

But it can also be very powerful if you look at situations like we’re in right now, crisis situations where you need a deeper knowledge potentially of finance or reacting to economic shocks. Maybe it is really worth there being someone who has worked in the private sector or works in scenarios where that helps. I mean, I’m thinking of Rishi Sunak, which we’ll come back and speak to, but do you think that’s helping him?

The Rt Hon. the Baroness Susan Kramer:

I’m sure it’s helping it. I do think it’s important. Look competence matters so you don’t become competent at something without experience and without knowledge. So I think those things are important. We have a very strange political system because it’s those people who are elected that then form as it were the leadership within government. I have no criticisms of our civil service. I think there’s some things that could be done better, but basically we have a very good, brilliant civil service. But it sees its duty as to respond and deliver to the demands of the politicians that are put in place in the various departments. And ultimately that sit in the cabinet. It will follow that leadership, or it will not act, it doesn’t act independently. So having real competence and knowledge at that level is absolutely critical. You can probably get away with an awful lot when times are easy. When the going gets tough, you really do find out if you’ve got that embedded capability.

Anil Stocker:

Absolutely. So I want to turn a little bit to obviously, a sector that we share a mutual interest in, which was FinTech. FinTech movement that started here in London and in the UK, one of the global leaders of it. I remember getting together with my co-founders back in 2011, 2012 to start our company MarketFinance. But alongside me, there were other companies Funding Circle, GoCardless, et cetera. There were lots of- Zopa is another one- that had started. I often joke that in the early days under obviously a different administration than we have today, a different government, we were really given a lot of attention. We were invited to Downing Street, there were numerous events. There was events also showcasing us around the world. There was a real drive. And I still remember going to Downing street and one of the David Cameron’s top aides kind of stood up and said, FinTech is a future industry for us, and we want to invest a lot in it and promote it around the world. And then Brexit happened and that all changed a little bit. So how has Brexit and now COVID, do you feel that we’ve lost sight of that a little bit and what’s your view on the role of FinTech?

The Rt Hon. the Baroness Susan Kramer:

Well, let me get back to the context of the coalition, because I think it’s interesting. Those prior to actually going into government, and of course I went into transport, which is another hat that I wear. I’ve been on the board of transport for London. I had quite a transport history and my background as well. But before that, I was on the parliamentary commission on banking standards, which was a joint committee of both the houses. It was an expanded version of treasury select committee. To try and look at why on earth, we had the crisis and the crash in 2008 and nine. And also the knock-on problems, we looked at the misuse of libel. I mean, just a whole lot of series of problems within the financial services’ sector.

The political establishment was very conscious that the traditional banking sector had essentially let people down whether through arrogance or in competence, a very best. That reform was needed and that there really needed to be challenged competition. So the spirit was one of bringing in new players, inviting change, that particularly players that employ the latest technology rather than being stuck in sort of legacy technologies, with very backward looking attitudes, et cetera. So it was a time for change. And I think the Cameron led coalition was very open. If you look actually the age to of many of the people, they felt an immediate empathy with the young entrepreneurs that they met. They felt almost collegiate if you like. So with that particular group. So I think that really was openness. And if you remember my close colleagues, Vince Cable played a very significant party getting FinTech off its feet by using regional growth funding. To channel money via the FinTechs through to small business, because he could see so clearly that the big banks were never going to achieve the goals that needed to be achieved if we were ever going to get a recovery.

And I could go on about all the stories of banking abuse, they just extraordinary. So it was a period, I think of real openness, this new idea. I’ve been concerned that this is typical, you see the pendulum move in one direction and then it begins to swing back into the other. And I do think that the major banks typically with, arguing that they’ve made reforms themselves tend to have the air of government. They’re big, they’re powerful, they’ve got close relationships with treasury. I don’t mean that as an abuse, but just a reality. And I do think they have now recognized that the FinTech industry is a serious challenge. Some of them were linked with it. Some of them will fight it, but it is a serious challenge. And I think they’re trying to get the pendulum to swing back.

So very simple things. We’ve seen some of the FCA rules, which, which in the beginning, if you remember, the FCA was constantly trying to open up to new possibilities, we had the sandbox and a whole series of different strategies that were extremely supportive. Now you’ve got an FCA that is much more cautious, quite concerned about the power of FinTechs, constantly raising issues of consumer protection, some of which are real and some of which are not. We’ve seen that swing back and I’ve been really disappointed that as we look at COVID, I do not understand after the experience we went through in 2008, 09, 10, that anybody could expect the UK banking system to be a rapid funnel of large amounts of money into the UK economy. So if you look at the CBILS program, bounce back is slightly different. The whole process has been so painfully slow. I can honestly say hand on heart, because I raised the issue immediately on the floor of House of Lords. But had I been in that row, I would have started with the FinTechs as the mechanism to get the money out, not the banks. And it seems to me the government’s operated completely in the reverse direction. I honestly don’t understand why. Some of that is just not looking back to understand past experience.

Anil Stocker:

Yes. I think that’s a really interesting point because I think talking to the FinTech founders, when that early phase was happening, there was kind of a little bit of a sense of frustration because we built all these systems able to handle really fast decisions. And we’d been perfected over the years and the initial communication was very much with the banks. I mean, it has changed. So subsequently we’ve been accredited and we’ve got up and running, but there was quite a big delay. I think the method was not that just rely on the FinTechs and don’t rely on the banks. It was more just around, well the UK is invested in this FinTech industry. It seems a shame not to use it when there’s a crisis that could benefit from having fast decisions, getting more funding out to businesses when they need it.

The Rt Hon. the Baroness Susan Kramer:

And I’m afraid that, the banks because they’re sensible they understand how to make money. They will have done a lot of cherry picking. And that’s something that always frustrates me because I think if you want players to come in, they’re aught to be a level playing field. It’s one of the reasons why I’ve been raising constantly the question of why only the banks and the building societies in effect have been able to access the Bank of England’s turn lending scheme for the cheapest money on God’s earth. And so absolutely insane. There’s just so many kinds of issues. And you’re absolutely right, the government is gradually learning, but when you’re in a crisis really helps if you could do that fast. I think many things the Chancellor had done had been good and right. I think the whole direction of travel has been one that’s been absolutely essential, but I do think it could have been done much more effectively. And somehow that awareness and that knowledge base between 2010 and 11 and today, somehow that all seemed to get dissipated and lost. And I suspect if the FinTech industry continued to be constantly going through that open door at the senior levels of government, there would have been much greater understanding.

Anil Stocker:

Absolutely. What do you think about the intervention so far? Has it been enough? We’ve read a lot about bounce back loans, the big programs in the States as well with the paycheck protection scheme. Is there a case that you just flood money, almost helicopter money? You just give money to businesses with no checks. Do you think that’s the right thing to do?

The Rt Hon. the Baroness Susan Kramer:

I suspect there was no choice. I mean, there’s different ways you could do it, but you know, there are always a dozen ways to skin a cat. And I think you can get precious about one rather than another. I think we identified very early that a lot of money wasn’t going to get out the door unless the government gave a hundred percent guarantee. You could see what was happening in continental Europe, where that was on offer and the pattern was very different. We had those kinds of issues. There are details of it, but that you could argue about and you could criticize, but I think the direction of travel was right. All you could do is push money into the economy and try make sure that businesses that need not fail, didn’t fail, but then it’s the next phase that is going to be exceedingly challenging.

And I don’t think it’s going to be a short phase. It’s going to be a long phase. How we unravel out of this is going to be extremely difficult. I’m quite concerned that we should do a lot more on the equity side. And my criticism of future funding is just it’s dealing with fairly big entities, but it’s probably a very good scheme if you’re a venture capitalist, not a good scheme, if you’re in control or an angel for the use of EIS, not sure why that’s not in the scheme. There are all kinds of gaps and things. I’m also not entirely satisfied with what’s been done for self employed people. It seemed to me, HMRC has this thing about people who have personal service companies and it has allowed that in a fairly vindictive way to lead to gaps in the various support schemes for self employed people. I mean, that’s some other gaps in there as well. So I certainly wouldn’t say yes to absolutely everything and say, it’s all being done perfectly, but the scale and the kinds of mechanisms, absolutely necessary.

Anil Stocker:

It sounds like you think the recovery is not going to be V-shaped, it’s going to be rather slow and gradual, and maybe not even settling at pre COVID levels.

The Rt Hon. the Baroness Susan Kramer:

I think this is really hard to anticipate. I think we might get a bit of a V. I was talking to some of the car dealers. I mean, I get a sense that a sort of car purchases will bounce back, but not all the way back. So I think you might get the first bit of the V and then it starts to sort of plateau out much more and to improve much more gradually. I mean, I won’t pretend that I am the world’s most skilled economist, but if you look across the globe, this has been a global crisis and world trade it’s undoubtedly being crushed, frankly. And in quite a range of areas, there’s also quite a strong move towards protectionism. I get ready to shake by the shoulders, and be arrested for it I suppose, when I hear someone and I’m afraid, this is a typical Tory kind of statement of, we’re going to shorten the supply chains, we’re going to read domesticate all kinds of industry, and we’re going to export across the world.

Well, I mean, make up your mind. So you can’t basically say we want a world in which we import very little, but we export nearly everything. It doesn’t work that way. I’m very concerned by some of the global dynamics, the US/China relationship is just absolutely in the dumps. I think we’re all going to suffer as a consequence of that. Generally you see a lot of global political instability. So, I mean, these are not easy times. And then on top of that, we’ve got climate change, add to that the fourth industrial revolution, which really requires us to invest. How we do not have super high speed broadband everywhere in the UK is completely beyond me. You can see, the challenges all coming together and stacking, I think this is absolutely huge. And then we were reminded again, I mean, this last weekend. Race injustice that I’d say you can’t leave those kinds of travesties within your society and not deal with them and tackle with them. And there’s always an economic face to them as well. Regional inequality, generational inequalities. We’ve got a huge number of really critical issues on our plate and they’re coming stuck together. They’re not coming sequentially.

Anil Stocker:

Yeah, absolutely. I was on a call earlier today with some economists and they raised a very good point that this recession is quite unique in that it’s really depends where you sit in the economy and whether you hold assets, whether you don’t hold assets. And it seems to be exacerbating the inequalities that were already there even more so you see the stock market just booming. Well, people are loosing their jobs.

The Rt Hon. the Baroness Susan Kramer:

I can’t work that out. I will tell you. Somebody wrote about an optimism bias. I think, people get worried, they get anxious and whatever, and then they decide, well enough of all that. You get this sort of optimism bias. So I’m generally concerned. And I would say to younger people, I come out of that postwar baby boom generation I’m right at the tail end of it. In our own way, we were pretty aggressive around the whole series of issues. You just think of a generation that sort of tore up the attitudes and the approach to life of our parents. Very much the steady as you go, 1950s, recover from war generation and boy did it pay off for us? I mean, we’ve been aggressive. We taken what we wanted. Most of us done pretty well financially compared to other people. And I would say to the current generation, to you and others, you need to get out there and fight. This is the generation that got an awful lot. It’s not being very generous about passing it on quite frankly. Get in there and begin to command the agenda is my advice.

Anil Stocker:

Interesting advice. Well, thank you. If you were still at the treasury and you were going to give a few words of advice to Rishi Sunak, what would you say over the next few months?

The Rt Hon. the Baroness Susan Kramer:

I find this quite a dilemma. I really do. I suppose, despite what I say about being aggressive, there’s always a part of it. I’m an old fashioned bank. You describe me as an investment bank that I actually come from just slightly the generation before, that I did a lot of the early leverage buy-outs and quite a lot of the early securitizations in investment bank and for that reason, but I was still steeped in credit analysis on the days when you made a loan from a bank, you kept a large part of it on your books, and you’ve got it badly wrong. You could take down your institution. You were constantly aware of that. The consequences you’ve come out of that as a very good risk assessor and a good credit analyst. So I have that history behind me.

I know that at this point, it seems to me every direction I look in the path is extremely difficult. We can’t cut public services. They were cut too far. I think in 2010, there was fat in the system, but there hasn’t been now for several years and we’ve under-invested in public services. And that has got to be corrected and the public will not accept it if we don’t. We can’t go and cut welfare. I think people have gone onto universal credit during the COVID pandemic have been shocked, even with the enhanced universal credit to see how little is available to people who end up on the benefit system. It’s really just about destitution. And I don’t think that it’s something to people’s minds sort of before this time. So there’s really nowhere to go there.

We have got to invest in infrastructure, which is being under invested, and that’s not just money. It’s getting skills into infrastructure, which is almost the greater problem. And indeed, I think we can’t just do the traditional stuff and perhaps we need less of the traditional stuff we need to be in digital age infrastructure. So that’s going to be absolutely essential. We need to completely revamp education and people need to be skilled. So we need to really build lifelong learning. We probably need to revise the whole curriculum to equip people for the world that’s coming. I mean, there’s so much that’s going on on all of these fronts. And then we’ve got to deal with climate change, and that means shifting to a green economy and transitions always cost.

So you look at all of that and you say, how do I finance it? But I think we have got to start thinking about how we deal with taxes and you look for the broadest shoulders, but you don’t want to damp an enterprise. So you’ve got to be very careful how you think that whole process through. I certainly think we could use some hypothecated taxes, for the health service and social care where the problems are so extreme. I think people would be very willing to take that on board. But is that going to be enough? But a lot of people now are all just going, not a problem, interest rates alone, we can carry huge amounts of borrowing. And because everybody in the world is in the same place, which wasn’t true in 2010, when we compared with other people, we don’t look worse. So people won’t flee from our bonds, et cetera. A part of me that goes dangerous. I am really conscious with this sort of very long aged life that I’ve lived, that cycles do actually happen and interest rates that are low today. Maybe you can get away with this for three years, five years, they will start to rise.

Crises, does anybody think they only come in ones? What do you do when you enter a crisis and you’ve got no contingency left? So I think for a chancellor, this is going to be very, very difficult. And I think it’s going to require a change in political culture because I suspect as it were, the chancellor will have to take the risk that interest rates will stay low, at least in the near and possibly into the medium term. But he’s going to have to have plan B to be ready to shift the minute he begins to sense that, that isn’t true. There’s either another shock coming or rates are going to start to rise. You can just anticipate whole ranges of crises that could be visited upon us.

And I think that’s probably a different conversation with the public because instead of saying, I have the perfect solution aren’t I wonderful, support me. You end up having a conversation where you say, look, I think these are the next steps we have to take, but you know, we may have to go into reverse or we may have to shift. And that’s not a failure. It’s not a U-turn, it’s not getting an F. It’s just that when you run your business events change, you change the way your business runs. And I do think we’ve got to get some of that thinking into government. And we talked earlier about people coming out of the FinTech world and the business world and going into government for goodness sake isn’t that something that you would bring to that picture, the understanding that you need to be flexible, but need to be prepared to shift the changes isn’t failure. I think that’s going to be a very important message.

Anil Stocker:

Well, that was a very, very comprehensive answer. Thank you for sharing your views. I can only agree with a lot of what you said. It feels like big structural changes is necessary, and this could be the shift to a completely new way of running politics, which might need different types of people in government. So, thank you for sharing your story with us and glad of your support for the FinTech sector. And let’s watch the next few years, and hopefully as you say, start to take action and help with this because nothing will change without us all working really hard at it, and a new people coming in and new energy. So thank you a lot.

The Rt Hon. the Baroness Susan Kramer:

What a delight to speak to you. And of course, I remember those early days of FinTech when the entire industry came for a round table, and I think everyone fitted round one table. Can you imagine?

Anil Stocker:


The Rt Hon. the Baroness Susan Kramer:

Bravo with your success.

Anil Stocker:

Thank you for your time.

Anil Stocker View All

Co-Founder of MarketFinance

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