Brown’s super tax row

Posted on 5 Jan 2010 by The Manufacturer

Howard Wheeldon says its time for those that fear City of London alienation to fight back...

The City is still fraught with many fears, but one concern that those who create such a vast proportion of wealth for the UK economy could do without right now is fear that the unfair, disproportionate and internationally unrivalled ‘Brown’ tax soon to be imposed across financial markets will lead to serious City of London alienation.

It is perfectly reasonable in my view to conclude that the visible harshness of the implied government plans to endorse punitive taxation of earned bonuses would better be seen as a revised modern day version of Dennis Healey’s infamous “we will squeeze the pips” (sic) remark. That they [New Labour] should so conveniently choose to ignore that the very guys and girls they propose to seriously de-motivate and place at the mercy of such punitive super taxes also happen to create serious levels of revenue and income stream for the UK Exchequer is amazing in the extreme. Before a penny of the additional ‘super-tax’ has been collected, serious damage has already been done to the standing of the ‘City of London’ in the eyes of those that are employed or that actually employ the individuals concerned. Internationally, such lack of support for the City of London by the UK government has not gone unnoticed either. Not surprisingly, it seems that all levels of trust that had uncomfortably existed between ‘New Labour’ and those that work within all confines of the City of London have now all but broken down and that no amount of persuasion to grin and bear it will do. What just a month or so ago was simply the fear of alienation has already turned to perceived reality that, with so much damage already done, an exodus might have already begun. Indeed, several very fine houses that employ very many thousands of employees in the Square Mile and Canary Wharf have indicated that they may move parts of their respective businesses away from London to places abroad. With trust broken down one can hardly blame them!

Levels of concern being expressed by those that have necessary clout and that carry weight are now so loud that they just cannot be ignored. As one might expect, one such is the Mayor of London, Boris Johnson, who is reported as saying today that he is deeply troubled that Goldman Sachs should be considering moving parts of its business away from Britain following implementation by the government of the 50% tax on bonuses. On the basis of reasoning that lies behind the ‘New Labour’ government super tax plan it is high time that others stood alongside Boris Johnson to be counted. Understandably, given that a General Election is due and that ‘New Labour’ has regrettably and with all too little opposition carried public opinion to new heights in the quest to unfairly destroy the credibility of banks, it has been difficult for those that might otherwise seek to take a very different political view to speak out. Even so, given the seriousness that lies behind the New Labour plot and the potential that so much medium and long term UK income stream could be lost, it is time that others should either speak out or at the very least stand up and be counted. In doing so they must impart a message that while no-one is about to say that banks have necessarily behaved impeccably over the last few years, the bulk of the UK economic problems lies singly at the door of Prime Minister Gordon Brown. Years and years of incompetence – years and years of imprudence – years and years of waste and years and years of borrowing and spending policies that were out of touch with all forms of reality. Finally, years and years of spinning a message of false prosperity, that the boom and bust years had been buried for good and that the way forward for Britain was as a consumer driven society that relied on ever rising levels of personal borrowing too. Brown’s strategy is now busted flush but this is a man that still carries the weight of power and quite amazing public persuasion. So far few have fought back but now, along with attacking regulatory proposals that will also seriously damage the City of London, it is time for those of us that believe in the future of UK financial markets to fight back. In my view just one single bank department that may be lost to UK financial market scene is one too many. Heaven forbid, but just one bank lost could soon become a bakers dozen.

By Howard Wheeldon, senior strategist at BGC Brokers