As the main political parties begin gearing up for this year’s General Election, we can assume that the credit crunch, bankers’ bonuses and the like will play a central role in the campaign, as indeed these issues have done over the past 12 months.
Understandably, the lack of judgment and irresponsibility shown by certain parts of the banking community has generated deep anger amongst the public. It will therefore be very tempting for politicians from across the spectrum to put forward policies which seek to capitalise on these concerns to maximum effect. They just need to be careful not to take this too far and so do irreparable damage to our economy.
According to recent figures, the financial services sector contributes about 8 per cent to our GDP, as well as more than 1 million jobs to our economy. These are significant figures, especially given current economic circumstances. However, there seems to be an underlying view in some quarters that the City needs to be taught a lesson for the financial crisis we have endured. That is a very disturbing line of thinking — whilst increased financial regulation may well be a necessity, to take for granted the City’s status as a leading financial centre would be sheer folly.
What we should be doing is taking steps to make sure that the UK remains an attractive place for global institutions to do business, such as making a long overdue improvement to our transport infrastructure. Instead of this, with recent changes to the “Non-Dom” rules, the increase in the higher rate of income tax to 50 per cent and the one-off 50 per cent tax on bonus payments above £25,000, we seem to be doing the exact opposite and encouraging them to leave for more “business friendly” locations. And we seem to be having some “success” with this approach — according to recent media reports, foreign staff based here are asking their employers for transfers out of the UK. No doubt, the inward investment agencies of Singapore, Hong Kong, Switzerland and other countries can barely contain their delight at this news.
The election campaign will inevitably involve a forthright discussion on future economic policy. It is important that it does so but, in the course of that debate, the positive role which the City plays should not be ignored or forgotten.