London as the world’s Number One Financial centre.


             Let me court unpopularity. I am going to defend the City of London.

              The Global Financial Centres Index ranks London as the world’s Number One Financial Centre. It stays a little ahead of New York, and Hong Kong, which have been fairly consistent as the top three for some time. The only other European centre in the top ten is Zurich. Four top ten centres are Asian, and four are North American.

              Many countries would give a lot  to have a top ten financial centre. It brings jobs, incomes, and other business on the back of the financial transactions. The Euro area has been trying for some years to knock London off its perch, and replace it with a unified Euro centre in Frankfurt, allied to Paris. After more than a decade of the Euro, Frankfurt languishes at 16 and Paris at 24 in the league.

                 Centres like Hong Kong, Singapore and Shanghai have studied London’s success and try to emulate it. Only in parts of the UK, the host country to the London markets, does there appear to be so much antagonism to what the City does and what it stands for.

                  The German government acts as host and regulator to a similar success story in world automotive engineering, though Germany does not manage the world number one slot for volume of cars made. You do not hear the German government trying to impose regulations against the expensive and fuel hungry vehicles German industry specialises in making to sell to the rich of the world. There is no push to set an automotive transactions tax. There is not the same jealousy drive to convert people from Mercedes and Porsche to something more practical and mundane.  Even the active German greens are handled in a  way which preserves the interests of the motor industry which does so much to sustain the German economy.

               Similarly the French government acts as host and regulator to the world class French wine industry. French governments do not spend their time exposing the dangers of wine based alcoholism. They do not think up special tortures for people daring to make wines that only the very rich can afford to buy. They take pleasure in producing wines in France that can sell for thousands of pounds a case. They do not propose to cut their deficit by a special levy on wine producers.

               The UK takes the City’s pre-eminence for granted. Politicians of various parties delight in thinking up more new ways to extract more tax revenue, and to expose what they see as the immorality of the actions of some working in the Square Mile.  The large revenues that the UK government does draw from the financial industries are crucial to paying for the NHS and wider welfare system of the country.

               Is this pre-eminence in danger? Are most right to be complacent, thinking  that the City will always be there as the world’s number one whatever we throw at it?  Surveys show that tax, regulation and transport feature prominently in people’s decisions on where to locate their financial businesses. They do not look for the lightest regulation – they look for the right mixture of effective and credible regulation with sensible costs. They do not seek the lowest tax rate available, but if you push the taxes too high it does start to drive talent away. They accept that the price of wanting a great City with good restaurants, cafes, galleries, theatres and schools is some inconvenience to travel. However, if you let your transport system deteriorate too much it can cost you business. There are more beautiful cities around the world than there are top ten financial centres.

                  The UK needs to look after the City, as it is one of the outstanding sucess stories of the UK economy. A medium sized country does not achieve greatness in many areas, so it is important to reinforce success, not undermine it.

                  It was interesting to see in the figures for tax revenues and spending yesterday that Income Tax is now only up 2.4% on a year earlier.  It looks as if the 50% rate is having the predictable effect of lowering revenue. Yesterday’s better figures for borrowing were helped by very buoyant VAT and Corporation Tax, offsetting the very poor Income Tax performance. Recent figures are not conclusive proof of the power of the Laffer curve – I have presented that evidence for CGT here before. However, it is an interesting fact that revenues from Corporation Tax surged,where the government  is undertaking a phased programme of cutting the rate, whilst revenues from Income Tax spluttered, where the government imposed a large increase in the top rates.

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  1. Single Acts
    Posted February 22, 2012 at 6:23 am | Permalink

    Not all of us have been bamboozled into the vile game of “hate the banker” quite akin to historical scapegoating of any number of temporarily hate groups throughout history.

    Hate the bailout for sure, but the city provides jobs and tax receipts aplenty which you would hope might be popular. Rather like killing Kulaks then wondering why you are starving.

    • Robert K
      Posted February 22, 2012 at 9:08 am | Permalink

      good points

    • Disaffected
      Posted February 22, 2012 at 9:46 am | Permalink

      Reflecting on the strong language Mr Cable has used against the city and capitalism I am surprised more people and business have not fled. I read today that Germany and France will go it alone with harmonising their tax system to put pressure on the rest. I also read last week how the Treasury had launched a second legal challenge against the EU to stop a Euro wide transaction tax. I seem to recall that Mr Cameron was going to negotiate to repatriate powers and prevent the Eurozone from using EU institutions. He also dropped his opposition against the spending in Strasbourg not to upset France.

      How much tax is the European army going to cost us? I thought France and the UK were part of NATO, why was it necessary for Mr cameron sign another EU treaty with France?

      Any reason why the socialist government has not opposed the coup detat of Greece and Italy- I thought the UK was against dictators and were in the business of removing them in the Middle East to allow people to vote. No opposition this week to the Greek bailout deal where permanent EU finance inspectors will be imposed in Greece as they lose more sovereignty to the EU.

      John, you are correct at the one way traffic on laws and regulations. We see it every day with the CAP and its damaging effect on agriculture and business, fishing industry gone while other EU countries fish our seas. I am afraid the city will be given up to the EU and Cameron will roll over as he has done to date. The Uk will become a region of the pan European state unless Tory MPs get rid of Cameron. Lib Dems are still pursuing their fanatical EU dream.

      Reply: I raised the issue of Anglo-French co-operation with Dr Fox, recently retire Defence Secretary.He said he was in favour of it, as it is based on bilateral decisions and agreements, not on EU Treaty architecture. The bilateral agreements I am assured leave plenty of UK flexibility, something an EU move would n ot allow

      • Disaffected
        Posted February 22, 2012 at 1:32 pm | Permalink


        Yesterday on television Mr Osborne said Greece did not have choice regarding the bail out. That is simply not true. Does this mean that he and Mr Cameron are now completely sold on everything pro European and will use sophistry, spin, deceit, flannel to make swallow the EU tablet?

        • zorro
          Posted February 22, 2012 at 10:49 pm | Permalink

          With regards to Mr Osborne’s grasp of reality and judgement in matters. Let us consider his views on the unique stewardship of the UK Border Agency by Ms Homer and her subsequent appointment to CEO of HMRC….

          Here is a quote from the Daily Telegraph justifying her appointment. Firstly, the selection panel apparently believed that she had a “strong track record”.

          George Osborne also voiced his support, saying: “As was made clear by the Home Secretary’s decision, the problems at UKBA were structural…..Lin Homer is a very able public servant who is already bringing positive change to HMRC, building on the good work already going on in the department.”

          Quite incredible, who was the first CEO of UKBA, and its predecessor organisations…..One assumes that she had something to do with creating the structure of the organisation.

          Who knows, maybe Lin Homer might be viewed in a good light by the Coalition, and having a ‘Common Purpose’ with them….?


          • alan jutson
            Posted February 23, 2012 at 3:08 pm | Permalink


            Yes indeed, Liz Homer seems a strange choice to many of us out here who are not aware of her “successes” or how she may have dodged the Blame for the Borders chaos of the last 4 years.

            An old saying “it takes a fool to know a fool”

            Perhaps the same could be said of imcompetence, when referring to any selection committee…

      • uanime5
        Posted February 22, 2012 at 4:39 pm | Permalink

        Given that 24 EU countries support the Eurozone using EU institutions don’t expect Cameron to oppose them. He doesn’t want to make any more enemies.

        No idea what your talking about in Italy or Greece. Why do you think these democratically elected governments are dictatorships?

        The fishing industry is declining because they’ve overfished so much that there’s hardly any fish left.

        • zorro
          Posted February 22, 2012 at 10:40 pm | Permalink

          OK, so which recent elections did the current Prime Ministers of Italy and Greece win then?


          • zorro
            Posted February 22, 2012 at 10:42 pm | Permalink

            Over-fished by whom?….The Spanish trawlers with their nets that dredge up too many fish. Were the seas around the UK over-fished before the Common Fisheries policy and access was granted to EU trawlers?


          • uanime5
            Posted February 23, 2012 at 3:21 pm | Permalink

            Since when have elections been used to select a new Prime Minister after the previous one has been removed from office? John Major and Gordon Brown both became Prime Minister without being elected (though Major later won an election). Was the UK a dictatorship after this happened?

            Also there was overfishing before the Common Fisheries policy and we’d have the same problems even if only people from the UK fished in UK waters.

        • Single Acts
          Posted February 23, 2012 at 9:29 am | Permalink

          In the case of Italy, Wikipedia tells us the following

          “On 9 November 2011, Mario Monti was appointed a Lifetime Senator by Italian President Giorgio Napolitano. He was seen as a favourite to replace Silvio Berlusconi to lead a new unity government in Italy in order to implement reforms and austerity measures. On 12 November 2011, following Berlusconi’s resignation, Napolitano invited Monti to form a new government. Monti accepted the offer, and held talks with the leaders of the main Italian political parties, declaring that he wanted to form a government that would remain in office until the next scheduled general elections in 2013. On 16 November 2011, Monti was officially sworn in as Prime Minister of Italy, after unveiling a technocratic cabinet composed entirely of unelected professionals. He also chose to hold the post of Minister of Economy and Finance”

          So I imagine the concern is really the fact that Monti is unelected and the entire cabinet is unelected which makes your claim that the Italian government is democratically elected, er, wrong.

          • uanime5
            Posted February 23, 2012 at 3:33 pm | Permalink

            1) In Italy the Prime Minister is appointed by the democratically elected President. Monti became Prime Minister this way.

            2) The democratically elected President of Italy has to approve everyone who is in the cabinet. Monti’s cabinet was approved this way.

            3) Any new laws have to be approved by the democratically elected Parliament and the democratically elected President. Monti cannot circumvent Parliament.

            So how exactly does this government lack democratic accountability?

        • Disaffected
          Posted February 23, 2012 at 9:34 am | Permalink

          Oh dear, more socialist drivel.

        • Winston Smith
          Posted February 23, 2012 at 9:57 am | Permalink

          Its overfished because we gave access to the whole of Europe to decimate our fishing grounds.

          • uanime5
            Posted February 23, 2012 at 3:34 pm | Permalink

            No it’s overfished because people are catching fish faster than they can spawn. Also all trawlers in UK water need to be approved by the UK Government, which distributes the UK’s fishing quotas.

    • Disaffected
      Posted February 22, 2012 at 10:02 am | Permalink

      Put simply it is Lib Dem socialism to make a welfare state and everyone equal. As we know, they just want to be more equal than the rest. Instead of bashing bankers perhaps politicians ought to be getting their own house in order and refer a lot more MPs to the police to be investigated- I could think of a few Lib Dem MPs. Mr Clegg was going to clean up politics- still waiting.

    • Conrad Jones (Cheam)
      Posted February 22, 2012 at 11:50 am | Permalink

      Ken Livingstone expressed a frustration with Financial Systems by saying “Hang the Bankers”. I don’t think Hanging a Banker a week would improve anything – because what are they guilty of ?

      The truth is, is that the Financial System is at Fault and the Bankers know how to use the enormous priveleges of creating money and deregulation and deposit insurance (provided free of charge by tax payers) to manipulate things in their favour.

      Labour Bailed Out the Banks
      Conservatives Bailed Out the Banks
      Lib Dems Bailed Out the Banks

      Where has democracy gone?

      The Bank subsidies are at the heart of the financial chaos which HAS spread across our so called Free Market Capitalist World. It is not a free market when certain sectors get bail outs while other more productive industries go bust simply because they don not have the lobbyists on their bank roll.

      Hating Bankers is not going to solve anything, Loving them (like Mr Redwood) is just going to make it worse.

      Mr Redwood – your right wing credentials are in tatters as you support gross mis allocation of tax payers funds, huge waste, and ever increasing Socialist tendencies towards continuing Welfare Payments to City of London Businesses. Do you not believe in the Free Market ? Do you not beleive that Banks should fail or do you just realise that we must kiss the feet of the men who provide our money supply – becauase the Government is too lazy to do it itself through the Treasury which costs the public enormous quantities of debt?

      What is the difference between handing out housing benefit to somebody (making it less likely that they will do useful work) and handing out billions in subsidies to Banks? It’s ALL Socialism – or is it Corporatism. Maybe it’s just Communism.

      Reply: I thought you read my views on this site. I strongly opposed taxpayer financed bail outs of banks

      • Conrad Jones (Cheam)
        Posted February 22, 2012 at 12:28 pm | Permalink

        Mr Redwood,

        Thank you for your reply.

        I did read them but this latest article seems to ignore the net losses to the taxpayer.

        If the Financial Sector is paying 25 billion in taxes and receiving £130 billion in subsidies then how exactly can you say that it is a success story? It’s losing £105 billion.

        Perhaps if you could highlight other benefits – and quantify them; then I would understand your argument.

        “The UK needs to look after the City, as it is one of the outstanding sucess stories of the UK economy. A medium sized country does not achieve greatness in many areas, so it is important to reinforce success, not undermine it.” – how can it be regarded as “outstanding success stories of the UK economy” -when the Bank of England has generated £325 billion in bail outs? In that case was British Leyland an “outstanding success story” of the 1970s with the subsidies it received?

      • Bazman
        Posted February 22, 2012 at 6:27 pm | Permalink

        It’s called corporate welfare. Communism for the rich supporting a middle class social security system. Which many of the middle classes say does not exist. Oh really?

      • JimF
        Posted February 22, 2012 at 9:41 pm | Permalink

        Reply to reply:
        But without bailouts the banks would be dead. So working backwards, where is the big success story? I’m sure British Leyland could have dominated world car making with £42 billion pumped into it. It wouldn’t have made it a financial success.

      • zorro
        Posted February 22, 2012 at 10:52 pm | Permalink

        There is a facade of democracy but very little ability to attempt any meaningful change. I fear that the most we can hope for is the rule of law, and freedom from war. Even if we get those, we will get little else.


    • APL
      Posted February 22, 2012 at 7:00 pm | Permalink

      Single Acts: “Hate the bailout for sure, but the city provides jobs and tax receipts aplenty which you would hope might be popular.”

      Largly agree.

      1. Failed banks should not have been bailed out.

      But since they were, tax payers are entitled to scrutinize the pay and remuneration of the bankers.

      Having done so, the bonuses seem to be out of proportion with the performance of the organization.

      In the USA, there seems to be (very questionable-ed) behavior by some of the TBTF banks. Politicians who’s election campaigns seem to be largly financed by those same organization are pretty much covering up for such behavior, often in apparent violation of the constitution.

      2. no one person or corporation should be exempt from an obligation to behave in a lawful manner.

      Put (1) and (2) together and implement policies supporting these aims, and I for one don’t care what a banker gets paid.

      Finally, Bonuses are a corrosive concept. Introduced to get around restrictions on pay such as penal rates of pay for high earners introduced by politicians for electoral advantage.

      Introduce a flat tax and bonuses would probably wither on the vine.

      If a salary isn’t sufficient to compensate a person for his time and diligence, then find another job.

      As to the City, if it gives us an advantage over our competitors, that is a good thing.

  2. Bill
    Posted February 22, 2012 at 6:35 am | Permalink

    Agree with all this. The current of criticism against the wealth-producing parts of the UK which circulates round the British media is misplaced. I think of it as having as little value as the publications of the Left Book Club that in the 1930s threw sand in the eyes of British intellectuals. We lost our car industry in the 1950s and 1960s (remember all those Morris, Wolsey, Austin, Humber and Daimlers?) and are we now to lose our financial services? Let’s hope not. Please, John, defend the City.

    • uanime5
      Posted February 22, 2012 at 4:42 pm | Permalink

      I thought we had to bail the banks out because they didn’t produce any wealth and made huge losses. If the banks are wealth producers why haven’t they paid back the money we loaned them?

      • Jon Burgess
        Posted February 22, 2012 at 9:45 pm | Permalink

        I thought Golden Gordon and his mob bailed out Northern Rock to appease Labour MPs and their North East voters. (Little good though it did them).

        Lets also not forget that Labour had some self interest in the protection of Royal Bank of Scotland and all those Scottish Labour votes. (Little good though it did them).

        It will be interesting to understand more about the role of the Labour administration in the rather shady and dubious take over of Halifax by Lloyds, when in hindsight it would have been better for everyone if Halifax had been allowed to fail.

        So you could argue that the decision to bail out the banks was a selfish move by a Labour administration to try and shore up their core vote in advance of an election that didn’t work and created a truly fitting economic legacy for the man who brought an end to boom and bust.

        • Conrad Jones (Cheam)
          Posted February 24, 2012 at 4:50 pm | Permalink

          “Golden Gordon” must also like the people of Jersey, Guernsey, Isle of Man and the Cayman Islands:

          “The Royal Bank of Scotland International Limited (trading in Jersey and Guernsey as Coutts & Co Channel Islands and Coutts and in Isle of Man as Coutts & Co Isle of Man and as Coutts) and Coutts & Co (Cayman) Limited are associate companies of Coutts & Co Ltd and are regulated in Jersey, Guernsey, Isle of Man and the Cayman Islands, respectively. Neither The Royal Bank of Scotland International Limited trading as Coutts & Co Channel Islands nor The Royal Bank of Scotland International Limited trading as Coutts & Co Isle of Man offer banking or investment products directly but can arrange for these services to be provided by Coutts & Co Ltd. ”

          It’s good to see a British Company have such an International Exposure?

          The Inland Revenue are also interested in these parts of the world – for similar reasons.

          Has the British Tax Payer benefited from this astute wing of the RBS Network?

          • Jon Burgess
            Posted February 24, 2012 at 10:55 pm | Permalink

            I don’t understand the point you are trying to make.

          • Conrad Jones (Cheam)
            Posted February 25, 2012 at 10:47 pm | Permalink

            @Jon Burgess,

            Thank you for reading my comment.

            I’m just trying to understand why the British Tax payer should help a Company that seems so very interested in setting subsidiary companies in regions of the World renowned for evading Taxes.

            People who pay their taxes willingly are helping to bail out Companies who – on the face of it; avoid paying taxes.

            Guernsey is an interesting place to register a Company for two reasons: Guernsey has got low Taxes, and Guernsey creates debt free money.

            Can you see the connection yet?

            Guernsey is a living, breathing example of a Sovereign State (It is not part of the UK), and one of the few parts of the World that is able to laugh at the rest of us – with our debt based monetary supply; because they are allowed to create their own money without needing Banks to do it for them.

            Guersney – like the UK; is under attack from the EU. Guernsey has a debt free money creation policy that works – the EU hates anything like that, because they cannot control it.

            I hope that clarifies things.

      • zorro
        Posted February 22, 2012 at 10:53 pm | Permalink

        Fair point.


      • Winston Smith
        Posted February 23, 2012 at 10:00 am | Permalink

        Those that received a cash injection to help their cashflow have repaid. The failed Scottish Banks and NR should have folded, but they employ lots of people in Labour voting regions.

  3. Ralph Musgrave
    Posted February 22, 2012 at 6:36 am | Permalink

    Why does the British Government continue to allow tax fiddles to continue in off-shore tax havens like the Isle of Man, Channel islands, etc? Reason is that it pulls in hot money or dirty money, which can be re-cycled in the City.

    If the City really has comparative advantage over other cities when it comes to finance, then fine. But let’s make sure that is not based on money laundering.

    • Robert K
      Posted February 22, 2012 at 9:09 am | Permalink

      What evidence do you have of City institutions being involved in money laundering? If you have any, I suggest you send it to the police.

      • cynicalHighlander
        Posted February 22, 2012 at 10:52 am | Permalink

        Google ‘Wealth Destroyers’ to find out the truth.

      • sm
        Posted February 22, 2012 at 3:23 pm | Permalink

        Watch Max Keiser , read Zero hedge,rolling stone, spectator, business work. It may be all legal(which makes it worse) but i doubt it.

      • Conrad Jones (Cheam)
        Posted February 24, 2012 at 5:00 pm | Permalink

        Here’s one example – the Police already know about it though:

        “As the violence spread, billions of dollars of cartel cash began to seep into the global financial system. But a special investigation by the Observer reveals how the increasingly frantic warnings of one London whistleblower were ignored”

        “Martin Woods, a Liverpudlian in his mid-40s, joined the London office of Wachovia Bank in February 2005 as a senior anti-money laundering officer. He had previously served with the Metropolitan police drug squad. As a detective he joined the money-laundering investigation team of the National Crime Squad, where he worked on the British end of the Bank of New York money-laundering scandal in the late 1990s.”

    • Jon Burgess
      Posted February 22, 2012 at 9:51 pm | Permalink

      Any examples of tax fiddles practiced offshore that you’d like to cite?

      Maybe, just maybe, the onshore UK tax rules are just a tad too complex, making it possible for bright accountants to work out legal schemes that minimise tax for individuals & companies.

      Simplify tax and the cost of legal avoidance brcomes uneconomic. I really thought this lesson had been learned long ago, but not by the current crop of MPs, it seems.

  4. Gary
    Posted February 22, 2012 at 7:05 am | Permalink

    The financial sector destroys wealth. It has to because it is merely a middle man or broker ,directing flows of money and collecting commissions. Any money it skims is at the cost to a primary productive sector. When the broking sector, or middle man, becomes the richest sector in the chain, you have a problem. Advances in technology are almost always directed at cutting out the middle man. So called frictionless capitalism or free markets is all about cutting out the middle man. If taxes don’t destroy this brokering, the markets surely will, because without legal tender laws and monopoly protection the financial sector would wither away to become a boring vault and clearing house. That we have based our entire future on such a precarious activity is very foolish.

    • Bob
      Posted February 22, 2012 at 9:58 am | Permalink

      Very well articulated.

      The Tobin tax is being justified because of the greed of the bankers, and the damage it has caused to our economy. The same justifications don’t apply to car or wine manufacturers, who at least do manufacture something. The banks just play sticky fingers with our money, they do do not create wealth, they live off of wealth creators, and now that the tide has receded we can see that like the fabled emperor they are lacking in the apparel department.

      Having said that, I do not agree with the Tobin tax which is just another stealth tax, which once implemented will be gradually ratcheted up from the tiny inception rate, which is purely designed to overcome initial resistance. Gradualism is the way the EU works. It started with the Common Market, then the European Community, then the European Union and now the FU. Everything is done in small hardly noticeable steps, hence the boiling frog metaphor.

      What we should be talking about is unwinding the Tory mistakes of the past, and unpick the retail banking from merchant banking, and keep the two distinctly serarate.

      Reply: According to EU theory selling and using large engined cars is very bad for the planet

      • Bob
        Posted February 22, 2012 at 11:49 am | Permalink

        Reply to reply: Point taken, it’s about Germany and France protecting their own interests while our politicians allow the EU to plunder and pillage the UK to their heart’s content.

        • alan jutson
          Posted February 22, 2012 at 12:19 pm | Permalink



      • lifelogic
        Posted February 22, 2012 at 1:09 pm | Permalink

        Of course the financial sector “creates wealth” – getting capital funding to the right businesses so they can expand, invest, merge and increase efficiency it is vital and creates great extra wealth. True they could be doing this rather better.

      • uanime5
        Posted February 22, 2012 at 4:44 pm | Permalink

        The UK also feels that large engined cars are very bad for the planet, which is why their tax discs are more expensive.

        • A Different Simon
          Posted February 22, 2012 at 9:28 pm | Permalink

          That typifies the way politicians think , or don’t think Uanime5 .

          The displacement of an engine is no more relevent than the colour it’s block is painted or the number of fasteners which hold it together or what name is stamped on it .

          If it was really about fuel consumed or carbon dioxide produced (not that the piddling amounts humans produce makes any difference to the climate) then ALL the taxes would be on the fuel .

      • Conrad Jones (Cheam)
        Posted February 24, 2012 at 10:55 am | Permalink


        I think you’re right. Finance has become a product in itself.

        I didn’t pay much attention to Economics in the 1980s, but I did notice that Banks suddenly created the phrase “Financial Products” and associated this with their Banking Services. This gave the illusion that they actually created something physical, an entity in it’s own right free and independent from the rest of human activity, that didn’t need real things, unhindered by reality – especially after the gold standard and deregulation.

        Money is just an accounting tool – to help balance out the exchange of goods and services.

        The Financial sector – regarded as a success story (for a few only) has clawed it’s success from 110% Mortgages, Interest only Mortgages, Collateralised Debt Obligations, Mortgage Backed Securities, Sub Prime Mortgages, Payment Protection Plans that do not pay out, Investment Plan mis-selling, short term profiteering aimed to make the next bonus as high as posssible, no matter what the long term costs are to the economy.

        Want to know why China is doing so well? They put manufacturing and industry in front and finance serves production – not the other way around as in the UK.

        When Finance stops being the tool and becomes the master, then creative production withers and dies.

        Greece is the first domino to fall – being taken over by Austerity Technocrats from the ECB. Italy has had its own Technocrat installed too, how long before Spain, Portugal and Ireland ?

    • sm
      Posted February 22, 2012 at 10:10 am | Permalink

      I agree based on current banking model.

      Banks could intermediate efficiently and aid in the allocation of capital thereby acting as a facilitator of wealth creation, by only by assessing lending properly on payback not on (rising) asset security.

      Now if you consider banking a facilitator or enabling its akin to a back office service function and we know how service function are mainly considered cost centres by the same banks. Retail and Investment banking must be legally split or allowed to liquidate.

      However a banks ability to create its own credit money for profit needs to be removed and or severely curtailed. Any money required should be created debt free by the state directly.

      ‘They do not look for lightest regulation’ where is the evidence for that. (Lehman , MF Global).Why does shadow banking exist, or secrecy offshore jurisdictions.

      Small Island states seem ideal, why is that? Perhaps there is little other real industry around to suffer the adverse externalities and consequences and vote to change it?

      Why no return to Glass Steagall?
      Does regulation gives protection and cover for the bailouts.

      Why are emergency interest rates and QE continuing still in force if we have such a paragon of industry adding value .

      We sure need more people like Max Keiser on indicate how bad things are.

      Would appreciate access to the backing document JR use’s for the articles?

      • Conrad Jones (Cheam)
        Posted February 22, 2012 at 2:00 pm | Permalink

        Excellent comments!

        Nice to see someone else mentioning the fact that Banks are allowed the privelege of “Printing Money” through lending. There is no longer a Fractional Reserve Requirement anymore – Skys the limit then.
        “The UK for example, which does not have required reserves, does have requirements that the banks keep a certain amount of cash”

        Max Keiser is a better bet than Stephanie Flanders if you want a more accurate view of the Financial Chaos that is now encircling the planet, but he seems to have jumped to the Revolutionary Stage years ahead of everyone else, and still proposes a Gold/Silver Backed monetary system – which will still alow currency supply issues and not aid industry, but will at least prevent unlimited amounts of credit being thrown into the fire of the Housing Market.

        “Why are emergency interest rates and QE continuing still in force if we have such a paragon of industry adding value .” – I think Mr Redwood needs to explain this because I cannot see how he can put the phrase “outstanding success story” and “the City” (City of London) in the same sentence. It deeply saddens me to think that Mr Redwood is no longer speaking out against proflugacy and is now actively encouraging it. Perhaps this outstanding success story refers to the few CEOs who (though talentless and unproductive ) and amazed their close circle of friends (many of which are Politicians) with their “outstanding bonuses” for failure. RE: RBS Boss Stephen Hester.

        The “outstanding success” of profiteering from Weapons Manufacture directly leading to the invasion of Libya as a result of human carnage instigated by the buyers of those arms (cluster bombs).

        I would sum up Mr Redwood’s faith in the Financial Sector as:
        “Faith is not ignorant of reality, faith just defies reality.”

        Reply: The City is far more than RBS/HBOS. My views on bail outs and failed banks are well known, and do not regard them as successes.

        • sm
          Posted February 23, 2012 at 9:32 am | Permalink

          I suspect the total of the subsidies will never truly be known and who received what,when and why in preference to others. The system systemically failed. The system was gamed and the taxpayers lost. What has changed?

          Seriously if we can print £50 billion at the drop of a hat, just break HBOS/RBS and others up and sell them to NEW players at a loss or liquidate them.Split the investment/retail banks and remove curtail the private creation of money.
          Print any required money for infrastructure spend, to remove NI.Consider QE to fund debt paydown see Prof Keen for details.

          Raise interest rates and be prepared to restructure’liquidate any other failing banks.

          Surplus bankers can then compete like normal labour and the very best of luck to them- no need for lamposts. I suspect if people really knew the truth , it would get scary, fix it before then.

      • libertarian
        Posted February 26, 2012 at 8:29 pm | Permalink


        You do know that Glass Steagall was an American law pertaining to financial institutions in the USA don’t you?

        • sm
          Posted February 29, 2012 at 7:29 pm | Permalink

          Thanks,Yes i do -but we can borrow ideas and well known repealed laws to make the point. No idea what similar laws were called in the UK if we had them. I remember ‘Big Bang’.

          I don’t think Vickers will work as well even if it makes it.

    • libertarian
      Posted February 22, 2012 at 9:53 pm | Permalink


      Spillage in aisle 5, get back to work please

  5. norman
    Posted February 22, 2012 at 7:09 am | Permalink

    Most of the current crop of politicians will be gone by the time the City’s fine run does come to an end so I doubt many care too much about it.

    There’s an election to win in 2015. What matters is that we squeeze every last penny out of every last citizen so that money can then be used to try and buy votes from every last citizen and if damaging the financial sector is one of the costs of that than so be it. After all, Labour would be worse so no price is too high to pay, no principle too sacrosant to abandon or no amount of money too much to print.

    I wonder if any politician really is so base as to think along those lines, or if it only appears so.

  6. lifelogic
    Posted February 22, 2012 at 7:30 am | Permalink

    50+2% is an absurd tax, a self inflicted wound damaging tax revenues, jobs and confidence all for the sake of a pathetic political appearance of fairness. It is just as self defeating as over regulation, expensive green energy, the inability to fire people, the EU, over taxation, over complex taxation, equality by government diktat and the over large suffocating state in general.

    It also fails to deliver a message of confidence to business and to the county. Is this just the Libdems, that Cameron saddled the county with, due to his lack of vision or is it a socialist Cameron himself ?

    I am amazed the city is still able to compete but I am sure the EU will put an end to it even if Cameron does not.

    • Disaffected
      Posted February 22, 2012 at 9:58 am | Permalink

      I still do not understand why John and other people say 50 p tax. It is not. Labour used firms to survey people on the words to use to con them in increasing National Insurance so that people thought it was to help the NHS. It never was intended and is still not intended to improve the NHS, it was a tax rise by another name- a con by politicians. Add the NI to the 50p tax rate. Also add NI to the 40p tax rate. Anyone over £35,000 is earning less than the government take. Under Lib Dems proposals it does not pay to work under £35,000.

      If one adds QE into the mix for savers, pensioners and the prudent then it is absolutely clear what a socialist coalition it is. What is hard to accept is that the Tory party are going along with it and are not likely to change it in the near future. Quite the opposite in fact. Cameron and his colleagues are using sophistry to con the public that everyone needs to work longer and down size their home- what for? A welfare state? Mr Bean, deputy governor of BoE, is reported today saying things are not the bad for pensioners and savers and they need to play their part. I suggest he is removed from office. After paying tax to keep all the wasteful government spending he thinks it is okay for the last part of our savings to evaporate. Oh dear, no wonder the country is in a mess.

      • alan jutson
        Posted February 22, 2012 at 10:12 am | Permalink


        I agree with these comments.

        • Timaction
          Posted February 22, 2012 at 2:25 pm | Permalink

          So do I. Why can’t they cut the state to a maximum 30% of GDP. There are still huge savings to be made if there was a will. The most unpopular policies cost us an absolute fortune. The EU, £10.5 billion for what? Trade? Not with a £50 billion trade deficit with them last year a lone! £11.5 billion borrowed to be given to states who have there own space and aid programmes and don’t even want it( India/Pakistan) or spend it on partying (Zimbawe). This is scandalous and does not improve the Tory brand. Out here in the real world people no one supports it or agrees with it. The arrogance of our leading socialist politicians is pitiful.

      • HJBbradders
        Posted February 22, 2012 at 4:54 pm | Permalink

        Sorry, the last post was dispatched inadvertently by my granddaughter playing with the mouse.

        What the aptly named Mr Bean should realise is that people in emplyment will be able to replenish their savings from income when all this is over. However, that is not the case for retired people. Furthermore, the inflation rate for people over 55 years of age is, according to Ros Altman 18%, not the 3.7% quoted for the CPI.

      • uanime5
        Posted February 22, 2012 at 5:25 pm | Permalink

        40p tax rate + 2% NI = 42%, 50p tax rate + 2% NI = 52%. So only people earning over £150,000 per year pay more in taxes than they get.

        Judging from your post you clearly don’t know what socialism is and just use it to describe anything you don’t like. QE is the tool of a capitalist or fascist government that considers the economy more important that the people.

        • Jon Burgess
          Posted February 22, 2012 at 10:15 pm | Permalink

          Er … no, to pay 40% tax you’d need to be earning £37,401 or more and at this level of income, Class 1 NI is 12%, so the total deduction is 52%, not 40%.

          For those lucky enough to pay 50% tax, the total Class 1 NI is 14%, so total deductions are 64%.

          I do hope you’re not an accountant.

          • uanime5
            Posted February 23, 2012 at 3:49 pm | Permalink

            The 40% tax rate is on annual earnings from £34,371 to £150,000.


            But NI is 2% for anyone earning more than £817 per week or £42,484 per year so the total deduction is 42%.


            So if you earn between £34,371-£42,483 per year you’ll pay a tax rate of 52% but from £42,484-£150,000 it’s 42%.

            The Class 1 NI isn’t 14% if you’re in the 50% tax rate and I have no idea why you think it is. It’s still 2% so the tax rate is 52%.

            I do hope you’re not an accountant.

          • Jon Burgess
            Posted February 24, 2012 at 11:11 pm | Permalink

            Apologies, you are right about the 40% tax threshold – £34,371 in 2012 – not £37,401 – that was the 2010-11 figure.

            But I think you need to look again at NI.
            How about here?
            Here’s a snapshot:

            If you’re employed you pay Class 1 National Insurance contributions. The rates are:
            •if you earn more than £139 a week and up to £817 a week, you pay 12 per cent of the amount you earn between £139 and £817
            •if you earn more than £817 a week, you also pay 2 per cent of all your earnings over £817

            So that’ll be 12%, or 12+2%

        • Winston Smith
          Posted February 23, 2012 at 10:02 am | Permalink

          Fascism is/was a branch of socialism.

    • uanime5
      Posted February 22, 2012 at 5:18 pm | Permalink

      A salary and bonus of £18 million is excessive so it requires a high level of tax. Also high tax rates don’t result in less tax revenues as the Laffer curve is nonsense.

      The UK is failing because there’s too much focus on high salaries for the executives, and too little focus on the salaries of low level workers and not enough training for young people.

      • Mark
        Posted February 22, 2012 at 10:01 pm | Permalink

        I agree that many schools haven’t been doing the job they were supposed to, but at least Gove is trying to put that right.

      • Jon Burgess
        Posted February 22, 2012 at 10:21 pm | Permalink

        You’ll of course be aware that cutting tax rates in the 1980’s generated increased revenues, so high tax rates do indeed result in lower revenues. Don’t take my word for it, do your own research and find this out for yourself, rather than trot out the same old lefty mantra.

        The UK is failing because for too many it is uneconomic to work and those in work are having to pay an ever increasing tax burden to fund the welfare society that makes it uneconomic for too many not to work.

        • uanime5
          Posted February 23, 2012 at 3:54 pm | Permalink

          Correlation does not imply causation. Unless you have a study showing how reducing taxation increased tax revenues you don’t have any proof that these things were even related.

          It’s uneconomic to work because the pay is often so low that the government has to give people in low paid jobs a high level of benefits and tax credits. Until the government makes minimum wage into a living wage the cost of welfare will keep increasing as more and more working people need government support to make ends meet.

  7. Antisthenes
    Posted February 22, 2012 at 7:50 am | Permalink

    In the UK and in continental Europe everyone wants to kill the goose that lays the golden egg. It is not banker bashing that is needed it is politician bashing so that the blame can be be put squarely where it is deserved. It was inept government that caused the banking crisis, bankers were only guilty of taking advantage of loose credit and poor government policies. In Europe they play the politics of envy and are guilty of double standards as you quite rightly point out. A diminished London financial centre helps no one in Europe when they relocate it will not be to Paris or Frankfurt. If this ineptness of our leaders and the pursuit of the social democratic agenda continues then it just not the loss of the city of London we need fear but much more besides.

    • uanime5
      Posted February 22, 2012 at 7:30 pm | Permalink

      No the bankers are entirely to blame for their own bad judgements. Just because there was easy credit didn’t mean the banks had to accumulate large amounts of bad debt, then expect the taxpayers to bail them out.

      A diminished London financial centre benefits the UK because politicians have wasted too much time on the financial sector to the detriment of manufacture.

      • libertarian
        Posted February 26, 2012 at 8:41 pm | Permalink

        Er there are currently 2 million people employed in Financial Services in the UK’s 12750 financial services businesses AND the UK is the worlds 8th biggest manufacturing nation employing 8.2% of total workforce . Data from the OECD shows that manufacturing output in terms of both production and value has steadily increased since 1945. A 2009 report from PricewaterhouseCoopers, citing data from the UK Office for National Statistics, stated that manufacturing output (gross value added at 2007 prices) has increased in 35 of the 50 years between 1958 and 2007.You can’t have one without the other as you’d know if you ever tried to start and run a manufacturing business.

        Now if you want to know what area of non productive work is the biggest drain on our economy and needs to be cut back drastically its the 5.8 million employed by the taxpayer as public sector workers.

  8. Electro-Kevin
    Posted February 22, 2012 at 7:56 am | Permalink

    “The large revenues that the UK government does draw from the financial industries are crucial to paying for the NHS and wider welfare system of the country.”

    Fat lot of good it’s done us.

    Perhaps I should remind you that this is not a success story. This country is stoney broke and it was the deregulated City (and its funding of the welfare state) wot dunnit.

    Reply: The state made its own bad decisions to borrow too much without the City issue. The state also wrongly decided to bail out three banks, when it should have put them into controlled administration.

    • Mark
      Posted February 22, 2012 at 12:53 pm | Permalink

      So who borrowed an extra £800bn in mortgages during the Labour years? (it was funded from borrowing abroad)

    • lifelogic
      Posted February 22, 2012 at 1:14 pm | Permalink

      You reply is spot on. Also the state subsidised them with the deposit protection guarantee and abjectly failed to regulate efficiently too. The blame lies almost entirely with the last Labour governments – and this one is far too slow in addressing the issues properly too.

    • Electro-Kevin
      Posted February 22, 2012 at 8:22 pm | Permalink

      Thank you, John.

      Gordon Brown’s “grrrrowth” which formed the basis for excessive state spending would not have existed without the ‘success’ of the City.

  9. Adam5x5
    Posted February 22, 2012 at 8:01 am | Permalink

    The status of the city is in danger – mainly from the ever popularity seeking government response of pandering to public opinion.

    Yes, the banks are unpopular at the moment.
    But the problem is not that they make a lot of money, but that they are/were taking a lot of public money to prevent collapse. If the banks had been allowed to go bust as should have happened in a free market, then we wouldn’t have anywhere near as much of the rhetoric coming from the left wing.

    The time for ‘banker bashing’ to stop passed a long time ago.

    At least bankers actually contribute to the economy, something that the current crop of political leaders seem intent on opposite of.

    Part of the problem for the populace who deride the banks is that they see no tangible benefit – people in Germany and France can see the products of cars and wine respectively. Yet most people in the UK can not or will not understand the financial products or benefits they bring – example speculation, which actually helps reduce price volatility despite what the Guardianistas would have you believe…

    • uanime5
      Posted February 22, 2012 at 7:33 pm | Permalink

      Please explain how speculation reduces price volatility when the main cause of price volatility is speculation.

      • Adam5x5
        Posted February 23, 2012 at 6:38 am | Permalink

        I’m an engineer, not an economist, so I’ll leave it to a well known one (Adam Smith)

        Start at para 40 and go from there,%20Ch.5,%20Of%20Bounties

        • uanime5
          Posted February 23, 2012 at 4:26 pm | Permalink

          This chapter don’t discusses speculation, it’s about how scarcity of corn raises its price in the market. This is an example of supply and demand.

      • Adam5x5
        Posted February 23, 2012 at 6:41 am | Permalink

        But to sum up, speculation basically smooths the price curve and moves the price rises around in time.

        It also happens to be a zero sum game – for every ‘short’ position, there must be an equal ‘long’ position by definition.

        • sm
          Posted February 23, 2012 at 10:15 am | Permalink

          What happens when a wall of ‘created’ money moves the market by virtue of its size and position particularly if too big too fail?

          Have you heard.
          ”The market can remain irrational for longer than you can remain solvent.”

          Move the market get in first then sell out as the passive funds move in or the economy takes the strain. Possibly leading to overproduction and then lower prices leading to closure of facilities. Wonder why energy prices go up irrespective of demand then crash.Have basic requirements changed.

          Only those that take physical delivery are real players.

          A good reason for a strategic reserve requirement and transparency in markets with HMG strategic reserve requirements being charged with a smoothing cycles. Selling to alleviate pressure on physical deliveries and buying at lows to replenish stock.

          Allowing banks to make massive naked speculative gains could be viewed as a backdoor recapitalization.

          Economists assumptions should be treated with extreme caution. Limits to financialization must be set.

  10. A.Sedgwick
    Posted February 22, 2012 at 8:11 am | Permalink

    Excellent performance on Boulton & Co. yesterday – the other guest spouted the usual Eurospeak but dropped a revealing and unsolicited remark denying a comparison between the EU and USSR. There is a difference the EU has a more democratic facade but developing Lord Home classic quote “one man, one vote, once” the EU version is one man, one vote, twice or as many times until the result suits the Commission. Your analogies here about defending interests are yet further examples why this amalgation of countries is a fool’s and dangerous dream.

    Reply: Thanks. The diminishing band of pro Euro business people in the UK do not have an answer to comparisons with the rouble, which is to me a good comparison for the Euro in the way it works.

    • A.Sedgwick
      Posted February 22, 2012 at 8:12 am | Permalink


  11. Richard1
    Posted February 22, 2012 at 8:14 am | Permalink

    Well set out. For this argument to achieve popular support however there needs to be a clear move away from state support for the banking sector. Unless banks can fail like other businesses – and like car and wine producers in Germany and France – there will always be a public perception that the City’s greatness is propped up by taxpayer support. This perception is perhaps the most pernicious effect of the wrong-headed Brown bank bailouts.

    Reply: I entirely agree and opposed the bail outs

    • asdf
      Posted February 22, 2012 at 10:43 am | Permalink

      Indeed I also agree with bank “wills” to deal any mess caused by a bank collapse without loss to small in general depositors.

  12. Sue
    Posted February 22, 2012 at 8:19 am | Permalink

    The EU is hell bent on destroying the City of London. It will impose regulations that we have no power to veto. The only way we will protect the City, is to leave the EU.

    • Disaffected
      Posted February 22, 2012 at 1:29 pm | Permalink

      Absolutely. And get rid of Cameron to force an election.

  13. Barry Sheridan
    Posted February 22, 2012 at 8:39 am | Permalink

    Mr Redwood, Britain as a nation has long had a peverse streak, one whose roots lie in our past with its prolonged social and economic stratification. Whenever the national fortune comes under stress, this latent sense of indignation seeks an outlet, the financial sector is the current recipient of that frustration.

    Unfortunately this also exposes another of our periodic follies, the tendency to lash out, usually at the wrong target. Yes the bankers have been responsible for some of the mess we are in, but those who are really responsible, the politicians, are escaping the intense condemnation that should be heaped upon their heads. It is equally unfortunate here that most Briton’s cannot bring themselves to face this fact and act on it. Those who run this country are supposed to be doing so to the benefit of those who elected them, instead as we see daily, the leadership, if not all MP’s, do anything but. What is worse our political leaders have artfully orchestrated public sentiment against the financial sector, an industry whose immense contributions provide one of the few remaining productive areas where Britain leads the world. Your defense then is not something to be ashamed about, it is simply an overdue recognition of what should be done. Britons should realise that should this industry leave they will be massively poorer. Time to stop being stupid don’t you think.

  14. alan jutson
    Posted February 22, 2012 at 8:45 am | Permalink

    Absolutely no problem with the financial success of London as a Banking/Financial sector, as long as that is what it is, a success without a taxpayer subsidy.

    No business (or Charity) is a success if it needs taxpayer cash to survive.

    I see from todays Press reports That Lin Homer The lady who it is reported presided over the BORDERS chaos of recent years, is now to be PROMOTED to be in charge of the TAX OFFICE.

    Once again we seem to have REWARD for FAILURE with a giant salary and pension.

    Stand by your beds for additional tax chaos, to an already over complicated system.

    Only in the UK, or perhaps Greece.

    Reply: I agree, and opposed the taxpayer bail outs to RBS and HBOS which were wrong and damaging.

    • Robert K
      Posted February 22, 2012 at 9:07 am | Permalink

      I agree, but only insofar as this relates to the state controlled banks. The responsibility for rewarding success or penalising failure lies with the shareholders

      • Bob
        Posted February 22, 2012 at 10:20 am | Permalink

        @Robert K

        Many of the shareholders are disenfranchised due to the fact that the shares are held in pension funds and ISAs, due to our ludicrous tax system.

        The voting is done by the city boys who manage our money, and they all tend to move in the same circles and vote on each others remuneration committees, which explains the explosion of ludicrously high salaries and bonuses among city execs.

        • APL
          Posted February 22, 2012 at 7:16 pm | Permalink

          Bob: ” .. due to our ludicrous tax system. ”


          But also the ISA might be a good vehicle for long term pension saving.

          In addition to the tax exempt status of the cash and or Stocks and shares ISA, why not introduce a tax privileged pension ISA, the government contributing to the investment in accord to your tax threshold.

          The only reason this is unlikely to happen is because of the huge pension funds that make a killing out of selling and cross selling pensions.

          Mr Redwood, you are supposed to be in favor of privatization. Why don’t you privatize pensions?

          Reply: The last Conservative government had a very successful policy to foster and encourage private pension provision. Blair/Brown inherited a strong private sector led second pension system , but look what happened next.

          • A Different Simon
            Posted February 22, 2012 at 9:46 pm | Permalink

            APL , do you mean “privatise” public sector pensions ?

          • zorro
            Posted February 22, 2012 at 11:04 pm | Permalink

            This is the saddest thing…the comparison of private pension provision pre 1997 with now.


          • lifelogic
            Posted February 23, 2012 at 6:19 am | Permalink

            Indeed they fiscally mugged and destroyed the pension savings of millions.

      • uanime5
        Posted February 22, 2012 at 7:38 pm | Permalink

        Since the UK Government is the major shareholder in RBS does this mean the UK Government failed?

        • zorro
          Posted February 22, 2012 at 11:05 pm | Permalink

          That’s silly. RBS was a basket case and should have been put into administration. Unfortunately Gordon bailed it out…..a bad choice


  15. Robert K
    Posted February 22, 2012 at 9:05 am | Permalink

    Well said! It’s remarkable but not surprising that you should need to start your piece by saying that defending the City is likely to court unpopularity. The truth is that the political elite has made such an effective hatchet job on the City that any defence of it seems controversial. This hatchet job was led by Gordon Brown, when he saw the failure of the system of banking regulation that he had put in place and that created the biggest boom bust in history. It was imperative for him to blame “fat cat bankers” rather than to allow any of the mud to stick with his own policies.
    Today, a typical refrain amongst the bien pensants is that the “UK relies to heavily on financial services,” and that “the financial services industry needs to be reined back”. When will these people understand the importance of the City not just as a revenue creator in its own right but a vital provider of capital to global enterprises?

    • Bob
      Posted February 22, 2012 at 10:22 am | Permalink

      Revenue creator??

  16. Caterpillar
    Posted February 22, 2012 at 9:17 am | Permalink

    (0) Definitely agreed the City should be celebrated more but it is difficult to see how to accomplish this (it might be a challenge for politicians to side with ‘Public Enemy No 1’ when in a first past the post system).

    (1) “if you let your transport system deteriorate too much it can cost you business” … and linking the City to some of the UK’s areas of Asian inward investment with, say HS2 calling in at BHX with an extended runway would be a good start.

    (2) “very buoyant VAT “. I think as noted in the Laffer curve discussions a little while ago, there might not be a peak for consumption taxes. Whilst I would not suggest a VAT rise (business calls for consistency + which people it hits) I would hope this isn’t the first tax to fall. {One might consider introducing a sugar tax rather than the PM’s alcohol pricing obsession}.Turning to individual earnings I would first prefer to see NI dumped and combined with income tax, allowing people to more simply mix their self-employed/employed working without tracking two types of NI … and dare I say I’d like to allow more people to contract so with less hire/fire protection and hassles. I would like to see considerations of what reductions in coproration tax could be offset with increases in income tax, but not make the changes yet! I’d like to see an end to stamp duty on residential property but the introduction of capital gains on the house you live in … perhaps quietening the Business Secretary’s call for a mansion tax. I’d probably also like to see a (temporary) reduction/removal of income tax on interest from savings upto a high cumulative figure, to help savers and to stop the annual ISA move ‘business’.

    Reply: I have never suggested a Laffer effect for VAT

    • Caterpillar
      Posted February 22, 2012 at 11:08 am | Permalink

      JR, sorry didn’t mean to suggest you had.

      What I meant was it was touched on in replies (admittedly probably mine) to J.Reade’s comments (February 14, 2012 at 8:09 pm – your Kaletsky blog). So if revenue raising is main target then consumption taxes might be the way to go. I think the Chancellor has it very hard here; I was wondering whether upping VAT could ‘compensate’ for dropping other taxes, but at the same time not liking it.

    • Mark
      Posted February 22, 2012 at 10:19 pm | Permalink

      CGT on the property you live in simply means you avoid selling it, unless you have made a capital loss on it that you can offset against other gains. If you want to see lower house prices and then much more damped property cycles, end the subsidies on mortgage interest and return to lower gearing – especially for BTL property.

      • Caterpillar
        Posted February 23, 2012 at 7:56 pm | Permalink

        I am pro-CGT on homes as (I believe) that there is a misdirection of resource due to the favourable tax status of homes as a savings device, which is removed from a savings-investment link, hence (I think) pulling rsource away from productivity enhancement. Alternative to the CGT would be an annual capital tax – a little Business Secretary like.

        In line with homes being used as savings device and, in line with exisitng pro-cyclical policy around them, I would be in favour of a dynamic LTV policy. So that at boom times a large deposit is required and at bust times a lower. Ideally this would help to protect from a negative equity trap, and also allow withdrawal at times of bust and prevent it at times of boom (though I recognise challenging to implement). [I do not ‘rate’ the MPC but introducing a separate policy leaver on a particualr bubble prone leaver might prove useful.

        Preliminary work by the Bank of Canada ( has found that,

        “In the face of … financial shock, a shock that revalues collateral and increases the borrowing capacity of households, a countercyclical LTV is a more e ffective tool for stabilization than monetary policy”

        “When … monetary policy responds to the credit boom …. countercyclical LTV is eff ective because it is well targeted at the source of the vulnerability.”

        • Mark
          Posted February 26, 2012 at 12:47 am | Permalink

          Counter cyclical LTV is a much more workable idea. Indeed, the old Building Societies Association used to operate one, and sometimes an absolute cap on loan size: the first time I bought a property, they wouldn’t lend more than £15,000 to anyone – no matter what their income. If you needed to borrow more to fund a purchase, you had to borrow on much less favourable terms from a bank.

          We might also usefully stop the massive interest rate subsidy on mortgages that is inherent in ZIRP.

          • Caterpillar
            Posted February 27, 2012 at 4:01 am | Permalink

            Totally agree on ZIRP.

  17. Alan Wheatley
    Posted February 22, 2012 at 9:19 am | Permalink

    We should be pleased to have that which is good, and it would be folly to undermine it through foolish action.

    I suggest the city itself, and government who benefit from the city, would do well to explain better what the City actually does and the consequential benefits to the nation. I emphasise “explain”, not spin. For most of us it is reasonably possible to distinguish between wines we like to drink and those we do not like, and between impressive cars we like (even if we do not own one) and those that fail to impress, but few can judge the merits of what goes on in the City compared with other financial centres.

    When big mistakes are made it is easy to point the accusing finger, and bankers are not good at selling themselves to the general population, with whom they have little to do. I certainly liked my bank more when my small business got free banking where as now they charge even though the account is in credit and not paying any interest. It seems to me there should be more competition within banking, at least in retail banking.

    As to a rebalancing of the economy, this does need to happen, but it should be a levelling up rather than a levelling down.

  18. Brian Tomkinson
    Posted February 22, 2012 at 9:20 am | Permalink

    There are many challenges to becoming and remaining the world’s number 1 financial centre. Putting aside other cities’ desires to hold the top spot, our main problem is the enemy within our own national government viz. the Lib Dems and their masters in the EU. We have a business secretary who is regarded by many as anti-business and we seem to have a prime minister who would seem to be happier leading that part of the coalition than his own party.

  19. oldtimer
    Posted February 22, 2012 at 9:23 am | Permalink

    I agree with your analysis and the need to support the activities of the city. It is unfortunate that the Business Secretary is not one of those who does.

    It would also help if there was someone in government who pointed out that the “city” does not just comprise “bankers”. It includes the insurance industry, the fund managers, the fx traders, the numerous support service businesses that sustain the multiple markets that actually make up the city. It is they who produce the so-called “invisible earnings” that really are invisible to those beneficiaries of the welfare state who rely on them. No wonder Frankfurt and Paris want all this for themselves.

  20. lojolondon
    Posted February 22, 2012 at 9:30 am | Permalink

    John, I am afraid you have been watching the BBC and listening to the left-wing in parliament (Labour, LibDem AND Tory!) for too long.

    You will not court controversy amongst your voters by supporting Banks and the city of London, only the left-wing nutters who run our propaganda organisation criticise the system that feeds them. All British people are proud of our capabilities, and, especially those who are beneficiaries, like the North, Wales, Scotland etc. should be delighted the banks do so well!

    But further down, your points are well made. If we had any balls, we would go to the EU parliament and put forward a bill suggesting a massive tax on car manufacture, say 20% of sale price. The Germans, French and Italians would be up in arms! We could further justify it on the basis of being a ‘green’ tax even though we know CO2 doesn’t cause global warming, enough left-wing idiots and media buy into the scam that they would support it.

    Then we would be in a position to do a deal – cancel the financial tax and we will cancel the car tax. THAT is how EU negotiation works.

    Or – perhaps we could just leave the EU. That would do it too. AND save £15Billion per annum. Why didn’t Cameron think of that??

    • Acorn
      Posted February 22, 2012 at 11:36 am | Permalink

      Have you noticed how useless the EU Parliament has been during the financial crisis? They have contributed nothing to a solution. Everything is being handled by the European Commission (Prime ministers and the like); the Council of Ministers (Secretary of State and similar) and the Commission (a paid executive cabinet).

      The 736 MEPs need 6000 staff to shift paper in 23 languages for them. Each MEP has a total organisation cost of circa £2 million a year. Each has salary personal and office payments of £470,000 a year of witch £170,00 is salary and fixed non-receipted allowances paid directly into a personal bank account.

      The EU is on its last legs. We should start liquidating the system from the inside with every political trick in the Treaties. Shutting down the EU gravy train will be an excellent start.
      Did you know, you can become a millionaire in five years as an MEP, only 736 people know that!

      • Acorn
        Posted February 22, 2012 at 11:38 am | Permalink

        Sorry European Commission should be European Council.

      • uanime5
        Posted February 22, 2012 at 7:56 pm | Permalink

        Allow me to explain how the EU works.

        European Council / Council of Ministers: Prime ministers and the like.

        European Commission / Commission : 27 executives, one from each member state.

        European Parliament: legislative body.

        Deciding what the EU does is the responsibility of the European Council and Commission as they’re the executives, not the Parliament. It would be be abuse of power for the Parliament to make decisions by itself.

        Also the costs and salaries you quoted are an obvious lie.

        • Acorn
          Posted February 23, 2012 at 9:21 am | Permalink

          Work it out for yourself:-

          Also, the following will help your understanding of the EU structure, if you want any tips let me know:-

          • Acorn
            Posted February 23, 2012 at 9:57 am | Permalink
          • uanime5
            Posted February 23, 2012 at 5:06 pm | Permalink

            Well as the EU’s entire budget is €862 billion the Parliament can’t have budget of €1,686 billion. Most likely it’s meant to be €1.686 billion so you’ll need to divide all the costs by 1000.

            The second link you posted just confirms what I said in my post and shows that your interpretation was wrong. The European Council and the Council of Ministers are the same thing, the only difference is which Minister is involved. The Parliament is a legislator, not the executive so it doesn’t have any role in the current crisis.

            The Telegraph is complaining over nothing. It even admits that MPs earn £155,000 (£15,000 less than MEPs).

            Reply MPs do n ot earn anything like £155,000. If you add in the salaries of their secretaries and case workers then you can get to these higher figures, but not even you can think that my secretary’s salary is in some way my salary.

    • Barbara Stevens
      Posted February 22, 2012 at 7:23 pm | Permalink

      I prefer the last item. OUT.

    • uanime5
      Posted February 22, 2012 at 7:51 pm | Permalink

      You do realise that without the support of other EU countries we can’t make EU laws, so the car tax will instantly fail. Though the UK Government can introduce a car tax on all cars sold in the UK if they want.

      Also after all our rebates the net cost of the EU is £4 billion.

    • StevenL
      Posted February 23, 2012 at 11:40 am | Permalink

      put forward a bill suggesting a massive tax on car manufacture, say 20% of sale price

      and call it VAT?

  21. A Different Simon
    Posted February 22, 2012 at 10:09 am | Permalink

    John they might do a lot of good things but it’s unfortunately offset by a lot of bad too .

    – Synthetic credit default swaps purporting to be insurance when they are not , synthetic gold and other synthetic instruments of no social value .
    How is it that the tax-payer is on the hook for guaranteeing deposits in banks which engage in casino activities like this which have no social value ? No commercial underwriter would do this or entertain the claims arising .

    – There is a saying that “you cannot defraud an honest man” . This flies in the face of the belief in the city that you could make money for nothing by repackaging of sub-prime loans .

    I don’t blame the City exclusively for sucking the life out of the real economy or puffing asset bubbles but they played their part in it for sure .

    Their consumer banking and customer support really is excellent and cheap compared with other countries too .

    As a country can’t we be more selective or do we have to take the whole package ?

  22. Peter Richmond
    Posted February 22, 2012 at 10:42 am | Permalink

    Our approach to industry can seem rather curious. Many years ago we had a strong food industry, in the 19th century we were known for our ability build railway engines, we had a strong car industry in the first half of the 20th century. Now we have a strong financial services industry. You are right in saying our governments do not defend these industries that provide so much employment and prosperity in the same way as our friends across the channel decent their industrial activity. One could argue also this is as much the fault of the leaders within the industry as much as government. But certainly you make a good point when you suggest our government should be taking on our European friends and proposing taxes that hit their industries. In the past at least our leaders knew the rules of war; ours seem not to understand economic warfare. They only to know how to acquiesce in the face of so-called rights.

    • A Different Simon
      Posted February 22, 2012 at 6:19 pm | Permalink

      If Banks were required to pay premiums for the taxpayer provided underwriting of deposits or the BOE was to stop robbing savers with ZIRP many of them would go to the wall .

      As you said yourself John they should have been put in controlled administration – hardly a sign of a healthy industry to be proud of .

      The financial sector exists to transfer money from people who make things to people who don’t , not to allocate resources efficiently .

      When it gets beyond a certain necessary size it ceases to become an asset and starts to impose a drag on the economy .

      If we are going to celebrate the City of London , shouldn’t we also celebrate all those other industries which only survived due to public subsidy ; British Leyland , mass underground mining .

      The UK financial services sector needs to get it’s house in order before it goes the same way as those 1970’s dinosaurs yet all we see is resisting any and all attempts to stop them killing their host , especially Glass Steagall .

  23. Atlas
    Posted February 22, 2012 at 10:45 am | Permalink

    I’m no great fan of the ‘City’. However all they did was play by the rules they were dealt.

    The fact that those rules included the US Federal Reserve forcing interest rates lower than they would have been; the US Government forcing sub-prime mortgages to be acceptable; coupled with China holding its exchange rate below what it would have been, resulted in the banking problem. Labour’s spending profile was small beer in comparison.

  24. Simon
    Posted February 22, 2012 at 10:48 am | Permalink

    Having looked at HMRC’s data, rather than reports of its published data:

    I can see that Income tax receipts are now back the the peak levels of 2008, with PAYE tax receipts at their highest ever level.

    Corporation tax receipts are indeed up from their low point of 2009-2010, although still far below the levels they were at their peak in 2008. Much of the gains from the previous tax year are from increases in north sea oil revenue.

    Looking at the numbers by sector, the only part of the UK economy that has not largely recovered is… the City. OK, so that’s because its 2008 level of output was all bubble and no trousers, but it does bring us back to the reason we are still bumping along the bottom of the worst GDP slump in over a century.

    Capital gains taxes are, as you say solidly down, however, as I can’t find the breakdown by tax band it is difficult to see how much of this is a real reduction in investment, and how much is simply the shifting of taxable income from capital gains to earned. In other words, how much earned income is no longer hidden as capital gains.

    • Mark
      Posted February 22, 2012 at 4:01 pm | Permalink

      You’re right to draw attention to the real numbers, rather than the assumptions that seem to underline some of the OBR presentation (perhaps nowhere more evident than on VAT, where they claim January receipts are down on a year ago while HMRC report £1.54bn extra).

      It’s clear that income tax is down – the only argument is the split in the reduction in revenue from 50% payers between those emigrating, those working less, and those taking deferred bonuses. Also down is stamp duty on shares – but CGT wealth tax receipts are up, although only 26.5%, as against the 55.6% increase in the rate.

      The increase in CT is all about high oil prices and high rates of North Sea tax, partly offset by much lower production. I did see reports that finally the Treasury has recognised the North Sea regime is counter-productive, and there will be changes in the budget.

      Fuel duty is also down year on year – evidence that it is reducing economic activity.

  25. Conrad Jones (Cheam)
    Posted February 22, 2012 at 10:56 am | Permalink

    In the times of cutbacks and mergers, why do we keep a separate Police Force to cover a population of 8,600 people when the Met Police to do it?

    Surely Metropolitan resources could be used to cover the City of London? Why do City of London Police drive expensive luxury pursuit vehicles (like BMWs) in an area of London renowned for congestion?

    • Conrad Jones (Cheam)
      Posted February 22, 2012 at 2:10 pm | Permalink

      Mr Redwood
      The comment that I added directly after this comment I am asking that you print it (I cannot demand it as this is not my website and I am grateful for the opportunity to add my views). This is an excellent website which obviously demands a lot of work and effort.

      If you wish to remove the line:
      “You are defending the indefensible – perhaps you have experience of this at your old Grammar School debating Society. You obviously enjoy a challenge”, then I am happy for you to do so -although I too went to a Grammar School myself and we had a debating society; so it is subject I know something about.

      Reply: No, that was not the line I was worrying about.

      • Conrad Jones (Cheam)
        Posted February 23, 2012 at 9:21 am | Permalink

        Mr Redwood,

        I realise that you have criticised the bail outs.

        If I said anything that was false or incorrect I would accept being corrected. My attack is not on the Conservative Party – is more an attack on the Labour Party; who made things worse. It us just frustrating to see a Conservative Politician repeat the same mistake as Gordon Brown who praised the City as the bastion of excellence just before it helped collapse the economy causing Gordon Brown to immediately ride to the rescue with BoE bail out money.

    • Electro-Kevin
      Posted February 22, 2012 at 8:28 pm | Permalink

      The Corporation of London pay for the City Police.

      • Electro-Kevin
        Posted February 22, 2012 at 8:30 pm | Permalink

        Plus those BMWs have Met area 1 radios in them which means that they can respond to NE quadrant of London emergencies.

      • Conrad Jones (Cheam)
        Posted February 23, 2012 at 9:06 am | Permalink

        And where does the Corporation of London get its money from?

      • sm
        Posted February 23, 2012 at 11:02 am | Permalink
        • Conrad Jones (Cheam)
          Posted February 23, 2012 at 9:25 pm | Permalink

          Interesting …

          “Like any other local authority, the City of London is divided into wards. These elect candidates to serve on the Court of Common Council, the City’s principal decision-making body. Unlike any other local authority, however, individual people are not the only voters: businesses can vote, too. Political parties are not involved – candidates stand alone as independents – and this makes organised challenge to City consensus all but impossible.”

          Democracy – City of London style, “and this makes organised challenge to City consensus all but impossible.”

          Mr Redwood,

          Are we not told that our servicemen are risking their lives fighting to give people in the Middle East Democracy when we are not even capable of providing it for ourselves in the heart of our own capital City?

    • cosmic
      Posted February 22, 2012 at 11:36 pm | Permalink

      There is a view that the City of London is a state within a state and can go its own way.

      I wouldn’t like to say how accurate that article is, but assuming it’s not total nonsense, it’s no surprise the City of London Police have expensive luxury pursuit vehicles if they feel like it and if their masters allow it.

  26. Conrad Jones (Cheam)
    Posted February 22, 2012 at 11:26 am | Permalink

    Mr Redwood,

    You are defending the indefensible – perhaps you have experience of this at your old Grammar School debating Society. You obviously enjoy a challenge.

    It’s good to have a Financial System that works and benefits taxpayers but the City of London has harboured many (questionable business people-ed) such as Bernie Madoff and his ponzi scheme.

    Much money is filtered through the City to far off Tax Havens as well as close by Tax Havens. Reducing the Tax bill to financial corporations is fine but when you consider the £130 billion of subsidies that the City Financial firms receive through Governmental Deposit Guarantees and the loss of revenue from seigniorage (as Banks create money out of thin air when then make loans) – the tax input from the Financial Fiirms (many located in the City) is about £25 billion. The Banking Sector therefore receives over £100 billion in subsidies – which means that the £7 billion bonuses are taken directly from tax payers. The £20 billion profits that Banks have announced are money provided by tax payers – not astute businesses practices but Welfare Payments. The City is basically a very expensive Social Housing Project funded by the tax payers.

    The Deregulation of Banking – paid for through lobbysists (paid for by tax payers ) has accelerating a collapsing financial system which will only end one way – through total collpase as the debts can never be paid off.

    Many well known Banks (I have discussed this before) have used these subsidies to inflate the housing Market and invest in Weapons Manufacture (of which many of these weapons are now banned due to the fact that they are sold to the highest bidder who uses them on civilian populations – RE: Libya).

    So, Mr redwood, I do NOT agree with you; the UK would be much better off if the City of London was merged with the rest of the Country – the City State mentality of this (unwelcome guest-ed) in the heart of London is NOT something to be proud of. I’m sure there are many people (Politicians and Bank CEOs) who would lose – but the vast majority of people would benefit from a change in role of this part of London.

    Please remember – the Emperor is not wearing any clothes and the City of London des not create anything of physical value, it is a drain on the Country – sucking the life blood out of industry and anything remotely positive and productive.

    I guess you know where I’d say something like this?

    • Lindsay McDougall
      Posted February 23, 2012 at 10:10 pm | Permalink

      What you should acknowledge is that the big mistake that was made with the banks was bailing them out in the first place, and that mistake was made by Gordon Brown. He certainly paid too much for the RBS and Lloyds/HBOS shares that he bought on our behalf.

      What Gordon Brown should have done was to say to RBS and HBOS (before more or less forcing Lloyds to take over HBOS):
      (1) Shut your doors for a week
      (2) Conduct a fire sale of non-toxic assets
      (3) Make as full a disclosure of the extent of your toxic assets as is possible
      (4) On the day that you reopen we will appoint an administrator
      (5) When we have done due diligence, we may make an offer for some shares

      That way, the pecking order for suffering would have been (a) RBS and HBOS shareholders (classic capitalism) (b) Depositors (c) Taxpayers. True, this is written with the benefit of hindsight, but should it not have been obvious then?

      There are lessons for what we should do now. Get rid of most regulation. Refuse to bail out any bank in any circumstance. Look all the bank Chairmen and CEOs in the eye and tell them that if they screw up, their bank will CRASH AND BURN.

      Capitalism hasn’t failed. It has never been tried in modern times.

      • Conrad Jones (Cheam)
        Posted February 24, 2012 at 11:04 am | Permalink

        Yes – Absolutely agree.

        We want capitalism for all – including the Banks.

    • lojolondon
      Posted February 24, 2012 at 7:25 am | Permalink

      To be honest I had no idea anyone was so mislead – London financial services support the tax payments that subsidise all parts of the empire, and certainly Cheam would be a broken down ghost town without it.

      • Conrad Jones (Cheam)
        Posted February 24, 2012 at 11:13 am | Permalink

        The Financial Sector receives £130 billion in subsidies. They pay in taxes (Corporation and PAYE) £25 billion.

        They therefore take £105 billion from Tax Payers.

        Austerity measures will further reduce the money supply, and the private sector is currently reducing it’s Investment plans and holding onto it’s cash.

        I don’t think Cheam would suddenly become a Ghost Town if the Government (i.e. us) had an extra £105 billion to invest in productive activity. It would generate an environment that would also benefit the private sector.

        If we go on the way we have been – with a National debt at £43 billion set to increase to over £60 billion, then Cheam might end up a ghost town.

  27. Damien
    Posted February 22, 2012 at 11:27 am | Permalink

    The ‘Ease of doing business index’ shows that our competitors; US , Singapore and Hong Kong all rate higher than us. However while their rankings have remained steady our ranking has now slipped.

    The City of London has survived and prospered in the aftermath of the great fires,plagues, 1930’s depression, and the blitz. If anything it is the infrastructure that could restrict its future prosperity. Even though it will benefit from a cross rail station at Liverpool Street (and also nearby Farringdon and White chapel) the weak link remaining is London’s limited airport capacity.

  28. Neil Craig
    Posted February 22, 2012 at 11:31 am | Permalink

    Our problem is that finance is far more mobile than other industries because it doesn’t need factories. A good computer and fast internet connection will do. Thus it is very easy to send this industry to Zurich, Abu Dhabi, Edinburgh, Jersey, Bermuda, Tahiti or a seasted in the middle of the Atlantic. Some of these have lower living costs, better air communication, lower taxes, less parasitic regulation, less crime or better weather. Some have several of these, Singapore has them all. We can not rely on inertia alone to keep it.

  29. Mactheknife
    Posted February 22, 2012 at 11:40 am | Permalink

    I think most people on here would be supportive of the City of London. The current hysteria around bankers and banking in genral is of course whipped up by those on the left (Labour, trades unions etc). The city is something to be proud of and for those who criticise and say the financial crisis was caused by the bankers my answer is that yes inititally it was but what is has done is expose profligate governments and expose currencies such as the Euro for what they are.
    However there are two points where I feel the city and governments need to take note:
    1. There still seems to be a culture of rewarding failure – this also applies to the corporate world in general.
    2. We as a nation have become too reliant on the financial services industry to the detrement of other sectors. Your recent blog on tax revenues from London and redistribution to the regions highlights this perfectly.

    The example of Germany is an interesting one. Perhaps our government should start thinking “out of the box” to coin a phrase on manufacturing development. Perhaps there should by tax cuts / incentives for new manufacturing start ups and extended investment in UK plants. Could be soft loans, corporation tax breaks, NI reductions on manufacturing jobs etc etc. By doing this we might stop German and French companies buying their UK competitors and closing them down as they have done in my home town over the last 20 years.

    • Conrad Jones (Cheam)
      Posted February 22, 2012 at 12:44 pm | Permalink

      “2. We as a nation have become too reliant on the financial services industry to the detrement of other sectors. Your recent blog on tax revenues from London and redistribution to the regions highlights this perfectly.”

      The Financial Sector recieves far more than it pays in taxes, therefore; there is no redistribution of revenues to the regions – quite the reverse.

      If you are referring to loaning money to the regions – then that is perfectly true, but this credit money is generated by the Banks and does not exist until the debtor signs on the dotted line. Most of this debt (92%) goes into non-productive industries – such as inflating House Prices. The Housing Price Bubble is what triggered off the Financial Crisis and has forced the Government to implement Austerity measures which has failed resulting in a further £50 billion of QE – digital money created by the Bank of England. This digital money could have been used by the Government instead of issuing Treasury Bonds (which incur more debt on tax payers). This drains more money out of the system and increases the likelihood of our grand children being laden with debt and less likely to go to University to study for a productive degree. Deficit spending is guranteed with our current debt based system and only benefits a few people (the Socialists) , the rest of us have a Free Market Capitalist System laden with debt.

      Handing over the power to create money to Private Corporations is like handing over your car keys to a drunk driver. You may not have to bother with the driving anymore, but sooner or later the Car will crash.

  30. Jason Williams
    Posted February 22, 2012 at 11:57 am | Permalink

    You make sense John and so does Dan Mitchell

  31. James Reade
    Posted February 22, 2012 at 1:01 pm | Permalink

    Interesting that you take a view on the 50% tax band numbers released yesterday that is fully in line with what you previously believed John.

    Also interesting is another fine mind happens to interpret it rather differently:

    I’m sure your supporters will wax on about how Duncan Weldon was an advisor to the last Labour government and is writing in the Guardian.

    I’d like though to see some active, actual engagement with the facts.

    It would be nice to see people adapting their views to the facts, rather than adapting the facts to their views.

    • Mark
      Posted February 22, 2012 at 9:49 pm | Permalink

      His statistics aren’t from the HMRC report I’ve read. January receipts of income tax were £21,803m, down by £193m on 2011. The article talks of receipts of £2.38bn and is a year out of date. It has precisely zero credibility.

      To be honest, I thought the Guardian was usually rather better than that.

      • James Reade
        Posted February 23, 2012 at 4:07 pm | Permalink

        Duncan Weldon has a lot more than zero credibility, I’m taking that as my starting position.

        Thanks for the link, but you’re going to have to help me. I don’t see the £2.38bn figure in your link, nor, for that matter, in what I think Weldon was trying to link up to but failed, namely—public-sector-finances-tables-1—10.xls

        Rather than just asserting on the basis that he writes in the Guardian and was associated with the last govt that he has zero credibility, I’d like to try and work out where he has got these numbers from.

        It’s something that should bother you too before you get too smug in believing you have got it right.

        • Mark
          Posted February 24, 2012 at 12:31 pm | Permalink

          The £2.38bn figure is in the Guardian article that dates from 2011 you linked to. Did you even read it before citing it? The point is that its figures bear no relation to reality. Even Soviet tractor statistics were more accurate.

    • Winston Smith
      Posted February 23, 2012 at 10:28 am | Permalink

      He’s a Labour activist, who once worked at the Bank of England and now works for the TUC. His analysis is taken apart in the comments, if you can get past the ‘kill the rich’ rants from the middle-class students.

      • James Reade
        Posted February 23, 2012 at 4:09 pm | Permalink

        Is working at the Bank of England a stick to beat him with? As I did predict in my original posting, most of you would point out his association with Labour and thus dismiss it.

        Reading the comments, I’m yet to find this decomposition you speak of – at least it aint convincing me just yet. All I find is people from different political viewpoints spouting stuff that supports their prior prejudices. Can you help?

        • Mark
          Posted February 23, 2012 at 9:11 pm | Permalink

          Too funny James… ignore the facts in my post that made NO reference to the writer of the article, but merely pointed out that the article was inaccurate and a year old.

  32. javelin
    Posted February 22, 2012 at 1:07 pm | Permalink

    Interesting points – as we appear to be heading toward the end game today.

    The IIF pleading from Dallara for Greek bond hold out – doesn’t seem to be working – they have lowered their 95% expectation of a take up down to 66% without any fanfare, and he is predicting (wrongly) direct catastrophy. Realistically it will just unleash the tiger on the other PIIGS whether the default works or not.

    US Debt/GDP ratio quietly slid past 100% today, that will get the bears running in the US.

    Mean while the marginal impact of Central Bank intervention is now approaching zero – or me this is a very telling chart because it plots one fundemamental proxy for central bank spending against another for investment in the US economy at a very basic level thats difficult to argue against. I like simple charts like this.

    As the commentary says either up the central bank spending by an order of magnitude or hope the stimulus to date is enough (which it clearly isnt). SO clearly there is no way out – BUT to all PULL our FINGERS out, cut the spending and the pay the debt back.

  33. Rebecca Hanson
    Posted February 22, 2012 at 1:41 pm | Permalink

    I think you often defend the city of London John. For example in your blog about the relative contribution to wealth of the different regions of the UK a few days ago you represented London and the SE as making a massive net contribution but did answer my question as to whether the London and SE figures still include the tax revenue of all who work in the public sector (but not for local council) around the country and therefore does not reflect reality. You also ignored my request for the source of the figures so that we could analyse them for ourselves.

    So it looks like you are misusing figures to make it look like the city contributes more than it does to the UK.

    In order for London to be a top international centre for finance in the long term we need to properly address the issues raised in ‘Masters of Nothing’. I don’t get the impression you even properly understand what they are yet John let alone that you understand how to address them.

    Reply: I did reply with the source.

    • Rebecca Hanson
      Posted February 23, 2012 at 6:00 pm | Permalink

      I’m afraid I can’t find your reply. Please could you give the source again. It’s the source relevant to this post I’m interested in:

      Sorry to trouble you but I’m genuinely very interested in being able to understand the generative source of your comment better.

  34. BobE
    Posted February 22, 2012 at 1:48 pm | Permalink

    A powerful executive of the Ford Motor Company was proudly showing the car workers union Chief Secretary around Fords latest factory. “This plant is full automated” he said “We only need a few workers now”. The Union man studied the huge array of busy robots and replied. “Yes, but unfortunately robots don’t buy cars!”

  35. REPay
    Posted February 22, 2012 at 1:51 pm | Permalink

    Well said…the Coalition has managed to deflect public ire from the last government’s regulatory laxness and overspend by courting the populism of bash the banker. Many of these major taxpayers are not British and will go elsewhere. If the UK is to continue as a lavish transfer union, then bankers and their business are sorely needed. Gordon Brown changed the regulatory structure because he thought Eddie George was a Tory. Once again party interest before national interest. Plenty of middle ranking bankers saw the crash coming…but no doubt the Treasury wanted the party to continue and the FSA was not fit for purpose. No reason to suppose that we don’t need banking.

  36. rose
    Posted February 22, 2012 at 2:07 pm | Permalink

    I often use the analogies with wine and cars myself when defending our main industry. But is it the case that those two continental industries are still jealously guarded elites, not open to any barrow boy to join? There is no shame for a Frenchman in being elitist, nor for a German in being meritocratic. Didn’t we go wrong in thinking we could abolish borders, classes, and elite education and training, and that standards would just take care of themselves? Standards of behaviour, loyalty, and honesty too.

    “My word is my bond” etc. didn’t just come about automatically: uncorrupt and honourable business practice took a long time to breed and instil, and needed to be reinforced in each and every generation. Good wine, olive oil etc and good machinery and cars are still to be had for those prepared to pay, but who can now trust the City in the same way? This is tragic because we probably all know young men and women who are upright, honest, and hardworking, who spend their days and nights auditing and accounting, to the very highest standards, standards set in this country.

  37. Popeye
    Posted February 22, 2012 at 2:28 pm | Permalink

    An excellent article Sir. The problem with this country is the preponderance of minorities groups, and the publicity given to them by the media. This is supposed to be a democracy with the majority opinion prevailing but with the wishy-washy political thinking prevailing, there must be no losers. Unfortunately the majority groups are usually the losers because undue prominence is given to the minorities, by the liberal leaning “ruling class”.

  38. forthurst
    Posted February 22, 2012 at 2:39 pm | Permalink

    JR referred to Germany’s car manufacture as a metaphor for Germany’s industrial might; instead of French wine and the better class of intoxication it presumes, he could have mentioned France’s industrial strength in automobiles, aeronautics, nuclear engineering etc. This country is now very weak in most branches of engineering other than defence.

    Why do we no longer have engineering industries, the match of those of France and Germany? What went wrong? Parliament stuck its collective head in the sand whilst Trotskyites trashed our industries one by one with as many different types of strikes as banksters can dream up derivitive contracts, whilst mistakenly putting its trust in spivs like (name removed-ed) and their cost plus internationally uncompetitive taxpayer ripoffs. Parliament is entirely to blame for the demise of our once great engineering industries by failing to ensure in good time a sufficient framework of law existed to protect it from rogue elements and too much concentration of productive capacity.

    Now that we we only have one basket left in which to deposit our eggs, we find we have exactly the same problem; parliament did not put in place laws which effectively deterred rogue elements from perpetrating large scale fraud and theft: as a consequence, taxpayers were forced to cough up far more than they ever were previously to cover the consequences of industrial failure. It is not even clear whether parliament thinks the activities of US institutions in the City are actually covered by English law, even if what they do can damage us.

    If JR is seriously concerned about ensuring the long term success of the UK financial industry, he would be doing far more to promote rules that ensure clients do not allegedly have their physical assets stolen , that those investing for their futures are not forced to compete with computer programmes, shorters, market riggers, that clients see London as a safe and cheap place to do business.

  39. David Langley
    Posted February 22, 2012 at 3:13 pm | Permalink

    Dear John, I looked at the Lords committee dealing with the EU delegation tasked with getting us to accept the FTT yesterday on BBC iPlayer.
    The attitude from the EU delegation seemed to be that they were politely telling us that we would be able to mess around with the rates charged but not the EU policy. They told the committee that they expected us to swallow about £10B tax on this, and they didn’t expect large financial institutions to jump ship from London, to some other part of the world. Are they correct are we going to have to accept a council directive on this on behalf of Cohesion, Subsidiarity or some other treaty convention we have signed away. The Committee were not impressed by this but seemed unable to ask the delegates to Foxtrot Oscar back to Brussels. EU Commissioners do not require it seems permission to do what they want within the treaty obligations our prime ministers and civil servants have signed away over the years? So Lords Huff & Puff may lose out on this. The Financial exchanges in NY and Far East will be eagerly awaiting another mad insane implosion from our Lords and Masters in the EU who have the real power now.

  40. Winston Smith
    Posted February 22, 2012 at 3:26 pm | Permalink

    JR: It was interesting to see in the figures for tax revenues and spending yesterday that Income Tax is now only up 2.4% on a year earlier. It looks as if the 50% rate is having the predictable effect of lowering revenue.

    I’m not sure if you can draw that conclusion. If you look at the latest ONS Labour Market Review, released last week, you will see employment has remained at fairly constant, year on year, with an actual 0.5% increase. The 50% tax rate should have raised total income tax revenues, but then the personal, tax free allowance was also increased. The constantly overlooked issue (by high earning commentators) is the fiscal drag on middle-earners. If you include inflation, the 40% tax rate was lowered by 12% last year. With the VAT increase, green taxes, higher fuel duty, 6% rail fare increases, etc, we are being screwed. Don’t forget, we will soon be losing child benefit.

    As the State increases taxes and regulation beyond reasonable levels, people will increasingly opt out of the system. There are two ways of doing this: immigrate or become self-employed. If you study the ONS stats you will notice large increases in self-employed status, over the past two years. Large numbers of young, ambitious professionals are also moving abroad, and who can blame them?

    • Winston Smith
      Posted February 22, 2012 at 3:29 pm | Permalink

      When I say the 40% tax rate was lowered by 12%, I mean the tax band.

  41. uanime5
    Posted February 22, 2012 at 4:29 pm | Permalink

    John the entire City accounts for 2.4% of the UK’s GDP so even if they contribute 2.4% of all the taxes paid it can only play a minor role in paying for the NHS or welfare. Also the City doesn’t create a lot of jobs because large parts of it are automated. The City is not as important as you pretend it is and the UK will be able to survive without it.

    “It was interesting to see in the figures for tax revenues and spending yesterday that Income Tax is now only up 2.4% on a year earlier. It looks as if the 50% rate is having the predictable effect of lowering revenue.”

    Let me get this straight tax revenues from Income Tax have increased and you’re claiming that this shows that the 50% tax rate is lowering tax revenues. If the 50% tax rate was lowering tax revenues wouldn’t the amount of tax revenues from Income Tax be falling instead of increasing?

    John the reason why Corporation Tax is surging while Income Tax is spluttering is because the wealthy are avoiding paying their taxes by setting up companies, having their salary be paid into these companies, and paying themselves in shares so they pay Corporation Tax rather than Income Tax. If you outlaw this Income Tax will continue to rise and the Laffer curve will be show to be useless.

    Also if seems the Government has decided to bully doctor who opposes their Healthcare bill. They must be getting desperate because so many people are objecting to their attempts to sell the NHS to private healthcare companies.

    • Mark
      Posted February 23, 2012 at 11:38 am | Permalink

      Please get it into your head:

      Income tax revenues are lower

      January 2012 £21,803m January 2011 £21,996m down by £193m
      Apr-Jan 2012 £126,344m Apr-Jan 2011 £126,729m down by £385m

      They were supposed to increase by £6.1bn according to the budget projection, but despite the numbers in employment remaining stable and on forecast they are £6.5bn behind forecast.

      Here is what the OBR said about CT:

      As usual, January was an important month for corporation tax receipts. Many medium and large onshore firms paid the third of four instalment payments on their 2011 profits, while oil and gas firms paid their third and final instalment on their 2011 profits. The strongest growth in corporation tax was from oil and gas firms, where the effect from higher oil prices and the increase in the supplementary charge announced in Budget 2011 offset the effect from the sharp fall in oil and gas production during 2011. Corporation tax from the financial sector continued to be well below a year earlier, consistent with announcements on bank profits.

      • uanime5
        Posted February 23, 2012 at 9:21 pm | Permalink

        The number of jobs being stable is misleading as it remains constant even if more people work part time, work for a lower salary, their salary doesn’t increase with inflation, or they receive a tax cut for being a low earner; all of which will reduce tax revenues.

        So corporation tax is low because the banks aren’t making as much money. I guess that’s consistent with RBS announcing it lost £2 billion this year, up from a £1.4 billion loss last year.

        • Mark
          Posted February 24, 2012 at 12:23 pm | Permalink

          Actually, it would take simply massive changes to part time working to achieve what you suggest. Again, the employment statistics do not bear this out, showing fairly stable numbers in part time working. See Table 3 on p 26 here:

    • libertarian
      Posted February 26, 2012 at 9:08 pm | Permalink

      You are wrong on both counts the UK financial services industry generates 10% of national income it has £60 billion of overseas export earnings in services and employs 2 million people in the UK. Without financial services how would our manufacturing, pharma, IT and other sectors finance, ship and hedge against currency fluctuations in international trade? How would they acquire the capital to invest in equipment and factories. The trouble with anti capitalists is they’ve never tried to run a business so they have no conception of why say a futures contract and other forms of derivatives are vitally important to farmers or manufacturers. They’ve no idea why FX trading is crucial to international businesses. They’ve have zero understanding of the importance of commodity trading etc etc.

  42. Jose
    Posted February 22, 2012 at 4:46 pm | Permalink

    As I remember, French government stepped in by drafting a law to protect companies in “strategic industries” such as Danone from takeover. So to France, Danone the biggest yogurt maker in the world is strategically important, perhaps we should introduce a yogurt transaction tax or should we simply roll on our backs to the French and Germans?
    They are all opportunists eyeing the possibility of a ‘free lunch’ and need short shrift, it’s all they understand…plus we need some legislators to look at some penalties we could propose for their ‘strategically’ important industries such as Danone.

  43. cosmic
    Posted February 22, 2012 at 5:34 pm | Permalink

    This is a major industry which we are good at and which has kept this country afloat for many years.

    If we don’t want it taken off us or destroyed we haven’t much choice but to leave the EU.

    • uanime5
      Posted February 23, 2012 at 2:03 am | Permalink

      The entire financial services industry accounts for 10% of GDP and used to be much less. It has never kept the UK afloat.

      • cosmic
        Posted February 24, 2012 at 1:31 am | Permalink

        Well that’s OK then. Just let it go, it’s not that anyone would notice.

      • libertarian
        Posted February 26, 2012 at 9:16 pm | Permalink

        So you don’t want to insure your home, contents, life or car then? You don’t want a credit or debit card? You aren’t fussed about buying anything on the Internet? You don’t want anyone to borrow capital to invest in a new factory? You don’t mind paying in cash in advance to buy a home outright? We don’t need venture capital or the ability for a business to raise money on the stock market.
        You don’t need or want a pension? Yup you’re right, who needs financial services, total waste of time…..

  44. Iain Gill
    Posted February 22, 2012 at 5:49 pm | Permalink

    the problem is there are lots of businesses which bring in big money into the UK, and many of them get not a whisper from politicians, its not since Mrs T and Mr Tebbit have any ministers visited a rock video studio or recording studio, think this is a joke? check out how much the music business brings into the country. never known any politician visit a live software project in full swing, frank dobson being the notable exception but thats hardly top marks for politicians is it. i was the chief brit on a multi hundred of million quid export visited by a PM, guess what all the brits were kicked off site as a security risk and only the foreign customers allowed to meet the great PM. politicians view of business is gained from what they hear in their clubs and attending the bullshit conference circuit, and thats half the problem.

    finance industry is important yes, but so are lots of other segments of the free market economy, and a little bit of balance would be a good thing.

  45. Peter Lloyd
    Posted February 22, 2012 at 6:23 pm | Permalink

    It’s tragic that you have to write that you think you are courting unpopularity.
    Most people barely know what the City does and don’t have a considered view that it’s bad even if they have a view at all. Do people know it’s the leader in most of the global insurance business? They certainly don’t know what a banker does or that there are many types of banker.
    The unpopularity is derived from the “liberal” elite and the media and is the current zeitgeist.
    The City is full of great businesses and people, of which only a few are genuinely irresponsible or have caused any damage to the banking system.
    You are in a good position to organise an event which can show people the value of the City. That would be really helpful and show off one of our great assets explaining why we are good at those businesses and (until now at least) have the right culture to allow the City and the people who work there to flourish for the benefit of Britain as a whole. Tim Congdon would participate I’m sure.

  46. Bazman
    Posted February 22, 2012 at 6:34 pm | Permalink

    If this banker bashing gets any worse many of the most talented people in the country will be put off from taking up a career in the city no matter how much money they are paid and we will all be the poorer for it. Does anyone actually believe this? I’m sure many fantasists do. Ram it.

  47. Barbara Stevens
    Posted February 22, 2012 at 7:20 pm | Permalink

    I agree with your points John, however, morality went through the window, and the electorate see bonuses as obscene especially when they own the banks. Yet, banks must be free to bring trade in of that we all must accept. I just hope Cameron will resist all attempts from the EU, ie, the Germans and the French, to making Frankfurt and Paris the accepted centres. This would give Germany far to much power all over Europe, and we all know what they do with power, abuse it. We are seeing that with Greece at the moment. I simply do not trust them one bit. They will pursue their thrust to get financial control of markets if they can, the question is how far will this government go to resist them?
    I’d like to know your comments on this John?
    We depend upon the City for such a lot, and we cannot afford to lose one inch of it’s trade, in fact we need to expand it to get more. In doing so, we also need trust to be reinstated with the nation and bankers. Better control of bankers from the Bank of England, its they who know best how to do this, not politicians. However, they need the courage and the deeds to be able to do it. Its time we all see that banking is an important item in the nations wealth and it as to succeed for all our sakes, but they must also see what happened in 2008 must not happen again, and the nation must not be called upon to fund another bail out.

  48. Martin
    Posted February 22, 2012 at 7:53 pm | Permalink

    By all means support the City of London but as your analysis the other day suggested much of the rest of the UK needs stellar performers of their own. It we had more stellar performers outside of London then perhaps what you see as unfair carping might decrease.

    Of course if some want the City to thrive some would advise a third runway at Heathrow. Anybody from Putney care to comment?

  49. Alan Radfield
    Posted February 22, 2012 at 8:06 pm | Permalink

    The government is incapable of running ANYTHING succesfully. Car manufacture, telephones, steel, airlines – they’ve tried it all. Look at the mess that is the government health service and government education. What makes anyone think they can run an economy or a currency?
    See Carswell’s blog for an idea that will sooner rather than later remove the control of money from politicians. Central bankers will wither and die – and they cannot stop us.

    • Conrad Jones (Cheam)
      Posted February 22, 2012 at 9:00 pm | Permalink

      The Government is very capable of running infrastructure and other monoplistic services extremely successfully. What you are saying is that you believe that Democracy isn’t working so let’s have less democracy, just like Bail outs do not work, so let’s have more bail outs.

      The Government doesn’t control the currency at the moment. For the past 300 years, these problems have got worse ever since the control of the currency by the Government reduced from 20% of the currency to under 3%. It got dramatically worse after 1971 when the world was deshackled from the Gold standard. 97% of the currency is now controlled by private Banks motivated to lend more and more.

      Douglas Carswell is proposing bringing back control of the currency to Government – where it belongs. The Private Banks can then carry out their business unhindered by Government so long as they do not create money.

      The Conservative Party attempted to bring back control of the currency with the 1844 Bank Charter Act but only applied it to Notes and Coins otherwise we might have seen 10 pence pieces with Stehpen Hester’s profile on it instead of the Queen, with Bob Diamond’s face on a tenner.

      • Mark
        Posted February 23, 2012 at 11:41 am | Permalink

        Have you ever studied a company balance sheet?

        • Conrad Jones (Cheam)
          Posted February 23, 2012 at 1:17 pm | Permalink


  50. Jon
    Posted February 22, 2012 at 9:44 pm | Permalink

    Thank God there is someone on our side. Its an ignorance of envy, how many people would resent Doctors earning higher rate? Does Germany resent its highly qualified and paid engineers? Does Dubai resent its highly paid oil engineers and geologists?

  51. Jonathan
    Posted February 22, 2012 at 10:05 pm | Permalink

    I agree you might be courting unpopularity, it would be fantastic if more of our MPs didn’t just play to the cheap seats and gave their opinions especially when it concerns over 10% of tax revenues.
    If these revenue creators, at the banks, get hit even harder how is this 10%+ of tax revenue going to be created? It will be down to the rest of us. The problem comes with the banks being bailed out, having no time limit in having to repay the debts. The same people arguing that the bankers are being rewarded for nothing are the same several years ago that argued for bailing out the banks. Orderly collapse of those banks would have been the most fitting reward for failure.

    • Conrad Jones (Cheam)
      Posted February 23, 2012 at 11:35 am | Permalink

      Banks receive £130 billion in subsidies (through Deposit Insurance and the act of creating our currency)

      They pay back in Taxes only £25 billion.

      A net loss of £105 billion to the Tax Payer.

    • Conrad Jones (Cheam)
      Posted February 23, 2012 at 11:55 am | Permalink

      If the Banks had not had been bailed out the economy would have collapsed into a depression. Many people in Banking work very hard and are very professional. There work would not change under a different monetary system. Bank databases and software would have to be modified but the Hardware and equipment would not. New Banking Practices would slowly be phased in and there would be no obvious changes to the way our accounts work. There will just be a far more stable and solid form of money to provide permanent liquidity to keep the wheels of industry turning, instead of the current Rugby Match economoy, where we all charge down the field for 10 feet then the whislte blows and everything stops. Then we charge again …

      The system by which noney is created has to be brought back to the Treasury and Banks should profit from there successes and be punished for there failures; just like any other business. I am not attacking people who work for Banks, I am arguing for a change to the system of money creation. Most people believe money is created by the Government anyway. If it was, there would be no need for a Bail out.

      Think about how money is created and where QE money went. Not “Directly into the Economy” as Labour and the BBC would have us believe, but to Private Banks Reserve Accounts, because Private Banks were bankrupt and needed additional Capital Reserves to make loans in order to create money through lending to stop the currency supply from falling.

      Even though this BoE money was created “at the push of a button”, we are under going Austerity Measures, mainly to service the ever increasing national debt which is also being hindered by personal debt.

      There was no real incentive for the Banks not to encourage irresponsible lending, there were only incentives to lend. This is what made everyone feel like the economy was going well. Gordon Brown and Tony Blair cashed in on this popularity and didn’t want to acknowledge there were any problems.

      Tony Blair now works for J P Morgan.

      • Conrad Jones (Cheam)
        Posted February 26, 2012 at 6:28 pm | Permalink

        It would be interesting to hear from a Bank Executive as to what governs their lending practices.

        Do they first check that they have sufficient capital reserves or do they concentrate more on the ability of the borrower to pay the monthly payments ?

        Does a Bank need a deposit before it can make a loan?

        A recent study carried out by the New Economics Foundation in association with the PositiveMoney campaign concluded – from a vast amount of data gathered from various sources; including the Bank of England – that a Bank does not base it’s decision on whether to make a loan based on it’s capital reserves. It bases it’s decision on the ability of the borrower to pay the loan back.

        This has huge implications as it has been assumed that the Bank of England can control the amount of credit creation – this hasn’t been the case – argues NEF and PositiveMoney; since the early 1970s.

        The mulplier effect of Bank created credit money – it would seem; is therefore out of date.

  52. uanime5
    Posted February 23, 2012 at 2:17 am | Permalink

    I managed to find a fact sheet by the City of London itself that explains just how valuable it is.

    The entire financial services industry account for 10% of GDP and provides 11.2% of total government tax receipts (includes taxes paid, as well as taxes collected, by the sector). However the City only account for 2.4% of GDP and it doesn’t say how much it contributes in tax revenue. So it’s safe to say that it doesn’t produce large tax revenues.

    Regarding jobs in 2009 it employed 316,700 people in 12,755 companies, though 10,280 companies had less than 10 people. This means over two thirds of people in the City work in 2,475 companies. Also as 30 million people are employed in the UK only 1% work in the City, so it not a major employer either.

  53. pete
    Posted February 23, 2012 at 10:28 am | Permalink

    It is a success story of course and even though statistically it may not directly employ huge amounts of people compared to say Tesco or the NHS, its does pump huge amounts of money into the economy which cascade into other sectors and help create jobs for others.

    Banker buys a new ferrari from his bonus, helps keeps one or two dealers in business, pays VAT on that Ferrari which goes to the gov’t. He will also spend huge money of wine and parties which is all taxed so it all contributes – based on this I think JR has a v good point.

    I still don’t understand though why the previous gov’t had to bail them out in the way they did. Given the huge amounts of QE we have seen why could the BOE not have simply printed off the billions needed and lent them directly to RBS, HBOS etc as emergency loans to be paid back over 10 years to keep them afloat?

    As readers agree here governments dont run companies or businesses v well so keeping the banks out of their grasp apart from good effective regulation to ensure they cannot leverage themselves too much would have done the job.

    In my view the previous gov’t was MOST to blame for the banking crash because it was they who TINKERED with the regulations. Step forward ED BALLS who wrote some sort of thesis and BROWN who pushed the whole thing through against the advice of the then BOE governor. Its all v well labour saying it was a global crisis – this is true, a global crisis caused largely by the US and the UK.

    I believe that the opposition should have had a sharper eye on what had been put in place, it seems Vince Cable (who I’m not a fan of) was the only politician who seemed to notice that the banks were too leveraged.

    Reply Both opposition parties highlighted the excess debt. I myself wrote of the forthcoming crisis.

  54. Lindsay McDougall
    Posted February 23, 2012 at 9:38 pm | Permalink

    If we combine these facts with John Redwood’s blog on the UK Transfer Union, a truly frightening picture emerges; we simply cannot afford the City of London to lose its pre-eminence as a source of revenue. And if we have to tell the EU to get lost, so be it.

    Ideally, the amount transferred within the UK should be reduced but that entails boosting wealth creation outside of London and the Home Counties. This has to be business driven, since it is counter productive to carry on creating public sector jobs there; for example, Mancunians will regard a transfer of part of the BBC to their city as a mixed blessing. A mixture of a lower benefits cap outside London and the Home Counties, and a reduction of corporation tax and National Insurance might do the trick. Import substitution will probably be as important as export growth.

    As an important aside, it is beginning to look (from recent statistics) as if we can finance an accelerated raising of the income tax threshold towards £10,000 by lowering the 50% tax rate to 40%. Given the coalition, linking the two will make good politics.

  55. Michael
    Posted February 24, 2012 at 4:55 pm | Permalink

    The arguments used against the 50p rate puzzle me. We are told it’s a disincentive, yet it contributes very little. Both cannot be true, surely? If it’s a disincentive it must be really hurting; if it contributes little, it’s clearly not hurting.

    Whilst I want taxes to be much lower than they are, I can see a political argument for retaining the 50p rate. It’s symbolic, showing that Tory Toffs are taxed more than Ed Miliband’s favourite, the hospital cleaner. If it’s so ineffective, why not retain it?

    Or are we being misled? Perish the thought…

    Reply: It can be both a disincentive and raise nothing – some are so put off they leave or earn less.

    • rose
      Posted February 24, 2012 at 8:26 pm | Permalink

      What is the point of a symbolic tax? Tax should be simple and effective, so it raises revenue cheaply and easily, and it isn’t worth anyone’s while to dodge.

  56. Robert Taggart
    Posted February 28, 2012 at 3:34 pm | Permalink

    ‘The City’ should indeed be cherished and encouraged and ‘persuaded’ – to do the right thing by the host country – make “loads sa money” and pay ‘its due’.
    Not wishing to go off at a tangent, but,…
    JR, you say there be many nicer cities not in the top ten of World Financial Centres – indeed. Why cannot ‘The City’ simply be handed ‘the keys’ to Millwall / Isle of Dogs ? Canary Wharf be all fine and dandy – better than what went before – but it be puny by world standards. Loosen the planning laws for that ‘isle’ allowing more and taller towers / developments to be constructed to the south of CW. Having done that ‘The City’ propper could be smartened-up and ‘chopped down’ to size (with only the odd exception – the Gurkin, Lloyds.)

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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