Boris Johnson has issued a new report on the future of London as a finance centre. I assume this is pretty much what the Conservatives think on this issue. So let’s look at what it and the associated press release says. It begins with classic tax competition rhetoric:
London must radically up its game or face losing its status as the world’s top financial centre, the Mayor of London Boris Johnson was warned today. The Mayor has vowed to protect the capital’s position and ensure London’s successful fight-back.
London’s position was at risk before the start of current economic downturn – it faces a real and serious threat from competitor cities that have developed aggressive strategies to steal business away from the capital.
Then it seeks to give this credibility
That is the finding of a landmark report produced for the Mayor by leading city experts. In June, the Mayor asked Bob Wigley, Chairman of Merrill Lynch for Europe, the Middle East and Africa to lead a panel of senior city executives including representatives of the City of London Corporation to examine how London could sustain its position as the world’s leading financial centre.
This man and his team are associated with the banking failure that has swept across London. Why should we attach any credibility at all to what they think?
Then note with whom the compared London:
The report found London is in danger of losing out to other cities:
– The favourable tax and regulatory regimes of cities like Dublin and Luxembourg have together attracted over £420 billion of investment funds away from London
– Across the Atlantic, Bermuda’s attractive regulatory framework and zero per cent corporation tax has seen its insurance market gain 700 jobs from London since 2000 with a loss of £450 million in taxes to the Exchequer.
– Dubai International Financial Centre is aiming for the same stature as New York, London and Hong Kong, backed by a government setting zero tax on income and profits and resulting in the licensing of 750 financial services companies in under four years.
– Singapore’s concerted strategy to turn its local financial centre into a regionally significant player has seen it attracting over 1,000 domestic and international financial institutions to become a regional leader and beacon for financial trading. These reforms were led by the establishment of an agency with the task of “developing Singapore as an international financial centre”.
What’s the message: low regulation and no tax. The message is unambiguous. The report might as well say ‘Let’s make London into a tax haven’. Just see how many tiems they say ‘zero income tax’ and appreciate what their real aim is.
There are other issues:
At home the report also identifies specific issues, including the burden of domestic and European regulation, deteriorating skills levels and under-strain infrastructure and systems. In particular it refers to concerns over the status of Heathrow, almost at capacity, calling for alternatives to be pursued to ensure that London as a hub does not lose out to its European competitors.
So that’s more deregulation, more subsidy for the City and lower tax now. Plus some more pollution.
But let’s not let Boris say it all. Bob Wigley, Chairman of the Review Panel said:
Boris asked me to carry out this timely review because as the Chairman of a business which regularly chooses where to put new business, I know what drives our decisions. Our recommendations start with the industry supporting the authorities to rebuild London’s reputation for leading global financial regulation and to restore trust in doing business in London. They go on to include investment to make London the location of choice, and in creating a more predictable, competitive tax regime which will attract companies to base their headquarters in London. We have built on the excellent work already undertaken by the City Corporation, and the Chancellor’s high level group and have drawn on the expertise of those running London’s largest banking, insurance, hedge fund, venture capital, legal and accountancy businesses.
It’s not a recommendation from a man who helped lead his bank to a forced takeover to save it from bankruptcy.
And then let’s look into some of the footnotes and see what they say on recommendations
2. Creating a Financial Services Board to promote London as a financial centre
– London should form a single powerful, properly resourced body, under the leadership of the City of London, to promote London’s position as a global financial centre.
– The agency shall promote London’s financial services sector overseas, anticipate strategically important trends and highlight domestically the industry’s contribution to the UK.
– A chairman of top industry calibre should be appointed to oversee the new body.
In other words, and let’s be unambiguous about this, we want to take London out of democratic p[political control because we can’t be sure the electorate will always deliver what we want.
And then there’s this:
5. Improving the competitiveness and predictability of the UK’s tax regime
– The Review developed three specific proposals for tax reform for consideration by HM Treasury:
– Improve the process of introducing new tax policy by forming a panel of industry experts to support HMT and HMRC pre consultation
– Use the tax system to reinforce the UK as the most attractive geographic location for companies to base their headquarters or regional holding companies
– Formalise corporation tax policy to demonstrate the UK’s intention to remain globally competitive
– An annual independent international benchmarking of the UK’s tax regime to be carried out by the widely respected Oxford Centre for International Taxation
What does this actually mean? Just this: create tax loopholes, prevent tax change to block loopholes, cut tax rates and then pay one of the least objective academics in the UK, Professor Mike Devereux of the corruption funded Said Business School at Oxford to undertake an annual review (what a nice little earner!) to check that tax rates have fallen and regulation has got easier or else banks will threaten to leave the UK in sham relocations to Jersey and Ireland, involving the relocation of maybe two jobs to Dublin and none at all to St Helier.
Put bluntly, what Boris is doing is promoting the failed economics of years gone by. It is exactly this combination of low regulation and low tax which has created three situations. The first is the low standing of the City. The second is the ongoing failure of large parts of the banking sector, hedge funds and private equity, none of which was noticed by their accountants: precisely the combination of people who read this report. The third, and we should not avoid this, has been the combination of the massive cost to bail out the failed institutions that many of the people who wrote this report represents all funded by the shift of the tax burden from those who can pay it (large corporations and their chief executives, exactly those people who wrote this report) onto the middle classes, all disguised as if this was good economics, a fallacy promoted by the likes of Prof Mike Devereux, and which has absolutely no foundation in evidence.
So let’s be blunt about what this economic policy promoted by Boris Johnson is. It is a further blatant attempt to divert the resources of the state for the benefit of the 1% or so in the population who command our corporate entities whilst at the same time loosening democratic control of the processes that might constrain their pillaging of our common-wealth. Since it is perfectly obvious that these policies have completely failed us there can be no justification for their promotion except that which has always motivated Conservative politicians, which is the blatant favouring of their own nests. This is a policy based on greed. It will not work. It undermines any prospect that the City of London could again hold its head high in the international financial community. And it blatantly seeks to reduce the taxation on the very wealthiest in our society and the companies they own cost to the majority.
Welcome to the world of 21st century Conservative Party economics.
It’s really not very pretty, is it?