4 Sep 2009

Where now for the Tory defenders of the City?

About two years ago I met one of the top British bankers and asked for an opinion on Brown/Darling vs Cameron/Osborne. I was shocked to hear his scepticism about the Tory business policy versus the government.

To be clear, this was Brown at his absolute peak, still ahead in the polls, just before Northern Rock and the missed election debacle. But there was an enduring concern from the top of this skyscraper that David Cameron’s efforts to rebrand the Conservatives away from nasty Big Business towards friendly Alaskan huskies had gone too far.

I ponder this after watching George Osborne’s fascinating joint appearance with Christine Lagarde, the French finance minister in the studio with Jon last night. Madame Lagarde is always great value.

Before the last G20 meeting she went head-to-head with Lord Mandelson on our show, amusingly referring to the prospect of Britain leading efforts to rein in the excesses of the global financial system as ‘like a computer hacker’ who ends up advising on IT security.

This time, we felt the shadow Chancellor, who could feasibly be in the next G20 finance minister’s meeting, would be interesting to watch in action alongside a real finance minister. While there wasn’t much disagreement between them, that in itself is rather interesting.

Madame Lagarde outlined a fairly robust approach to banker bonuses. ‘It better stop in months, it’s reprehensible and incomprehensible and goes against morals and ethics, we need change on the ground and in the human resources departments [of these banks],’ she said.

George Osborne applauded it, warned of the risks of beggar-thy-neighbour policies, lambasted the government for allowing megabonuses on the back of taxpayer support despite for two years promising the ‘end of the big bonus era’.

He said: ‘It’s not about envy or greed or a prices and incomes policies. It’s about not paying out megabonuses on the back of taxpayer guarantees and taxpayer support that was there to rebuild bank balance sheets not to support the pay of bankers… I’m signed up to coordinated international action on bonuses to avoid international arbitrage’.

So the prospective 13th post-war Tory Chancellor is hardly championing the City, certainly not in the way that Mayor of London appears to be. In current circumstances there’s probably more votes in championing estate agents or maybe even journalists than bankers.

Yet there are some tough decisions emerging out of international discussions at the Financial Stability Board. As the FSA’s Lord Turner told me yesterday, he favours new charges, rules, regulations and living wills that will create a market solution to incentivise smaller, simpler banks.

Lord Turner also said it was ‘dangerous’ to mix up the role of regulator with that of industry promotion. It’s a point apparently not lost on the Shadow Chancellor.