Sunday, March 21, 2010

Cameron - making it up as he goes along.

I'm a supporter of the idea of making banks pay a bit towards the government protection that they have inevitably received - although I'm concerned that this might be seen as a licence to take risks. I'd like to see a Tobin tax on transactions, but that can't happen without international agreement as a unilateral decision by the UK would be the death of the British financial sector.

Gordon Brown has been at the forefront of trying to establish a global agreement on bank levies, which is the only way that I can see this ever working. The Swiss are actively trying to encourage the finance sector to shift to Geneva and Zurich, while the Dubai government has expressed serious interest in becoming a global powerhouse and there's always the temptations of Hong Kong and Shanghai, which are likely to become even bigger centres with the continued rise of China as a global power.

Cameron's proposal is potentially destructive to the banking sector in the UK - a major contributor in happier times to the national income. His accusation that Gordon has failed to stand up to the City doesn't hold water - the IMF are expected to back a global tax proposal in April. Even the suggestion of a unilateral policy to be imposed by a party widely expected to win power in May could cost British jobs now, if banks decide to start the relocation process now rather than risk waiting for the policy to be enacted. Cameron may already be costing people their livelihoods.

One known hard-left agitator spoke out this weekend, criticising Cameron's proposals
Nick Anstee, the Lord Mayor of London, said at the weekend that the City would lose out unless the levy was applied globally: "It would be bonkers to do this alone".

Another un-named industry source added
There are two things we find uncomfortable. Firstly we are worried that the impact of an additional tax on top of much higher capital requirements will make it impossible for us to maintain lending at its current level. Secondly, we are concerned at the idea of the UK going it alone on this. There is a genuine feeling at the bank that if you punish the industry too much it will damage London as a financial centre and will force us to look at moving business elsewhere.

In the FT, another banker commented
The idea of moving unilaterally is just nuts. How is that consistent with maintaining London as a major financial centre?

And then Philip Hammond was left to row back a little and far from it being Cameron against the world, it was confirmed that this policy has only been launched because of the Conservative confidence that this will be agreed internationally.
Philip Hammond, shadow Treasury chief secretary, explained on Sunday that Mr Cameron toughened up the Tory policy only because he was confident that there would be a global agreement in any case. “It has become clear that this is now going to happen,” Mr Hammond said. “The US is introducing a banking levy, Sweden has already done so. The consensus is growing.”

Not quite such a courageous move on the part of the Tories, then - just picking up on the hard work already done by Gordon Brown and Alistair Darling.

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