Monday, 9 January 2012

The City of London is Britain's great success story - let's not screw it up!


The Economist reports (and who am I to argue with their figures) that the City of London generates exports sales equivalent to 3% of UK GDP. That is an awful lot of money - something in the order of £40 billion.

And it means that the City really is by far our most important industry. We don't hear the Americans complaining about Hollywood or Silicon Valley, so why have we arrived at such a down on the City of London? We should be celebrating the City's success, not bashing those who work in it and generate that £40 billion in export sales.

Instead we're moaning about how much city financiers get paid and calling for intervention or regulation, some people are agitating for special taxes on the financial sector that don't apply to other transactions, and there's an eternally repeated mantra of "we should make things" rather than handle the money.

Right now between a daft attachment to a 50% top rate of tax and rhetoric about executive pay, we seem to be doing our level best to screw up the prospects for our most successful industry. This is like the Germans slapping extra regulation and taxes on machinery manufacture or the Italian introducing a product design levy.

So the financial sector (or the parts of its concerned with lending money to people buying houses) played a big part in creating the current crisis. But that's no reason for Britain to hobble its biggest export earner or to introduce policies seemingly designed to drive the future leaders of that industry to Switzerland, Hong Kong or Singapore. So the French and Germans want to clobber the City - mostly because their financial industries are pygmies beside London's - and are proceeding to do so through their de facto control of the EU.

We don't have to agree to this do we? We can use the veto and - I hope this sinks in - when it's clear that Europe proposes to use majority voting to create regulations that damage the City, we should walk away. Right now the biggest threat to recovery is the puerile attacks by politicians on our most successful industry but in the years to come the real threat is the EU and its desire for a closed, constrained, undynamic (and "low risk") financial sector.

We should put the EU - especially the leaders of France and Germany - on notice that we won't accept attacks on the City's viability as the world's biggest and richest financial centre. And if that means leaving the EU, then so be it.


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