Regulation, tax and the City’s worrying decline

November 19, 2010 3:55 PM

Cities of London & Westminster MP Mark Field wrote in the Daily Telegraph yesterday about the worrying decline and lost opportunities of the City thanks to inept regulation, banal rhetoric and our punitive tax regime. Banker bashing, the 50 per cent top tax rate, the bonus tax and the banking levy have all compromised London’s international reputation as a place to do business.

There may not have been an exodus but some have left and others will have cancelled, postponed or scaled back their plans to set up in the capital. As important are the short term work visas for highly-skilled staff from outside the EU which are being denied too frequently. Slowly, London is losing its lustre, as Mark admits:
London’s place as a leading financial centre is increasingly regarded – both in America and in Asia – as weakened. If we cannot effectively argue our corner within the stagnant EU, what hope do we have of competing with Hong Kong, Singapore, Shanghai and emerging financial centres in India?

When he talks about arguing our corner in the EU, he is referring to whether the London-based European Banking Authority will have authority over systemic risks (investment banks, insurance, hedge funds and private equity) or whether these will fall under the Paris-based European Securities & Markets Authority. With the overwhelming majority of firms in those industries based in London and not Paris, it would make sense to have their regulation conducted from London, too. But that is often not the way EU institutions are formed.

The Government should listen to Mark Field and lobby hard to ensure both that Britain’s single most important industry is regulated from London and that the damaging 50 per cent tax and bonus taxes are dumped as soon as possible. This will be important as we move from the recovery to the growth phase of the economic cycle but – as we saw from the devastation caused by inept regulation and poor policy in this recession – it will seem even more important when the next recession comes.Cities of London & Westminster MP Mark Field wrote in the Daily Telegraph yesterday about the worrying decline and lost opportunities of the City thanks to inept regulation, banal rhetoric and our punitive tax regime. Banker bashing, the 50 per cent top tax rate, the bonus tax and the banking levy have all compromised London’s international reputation as a place to do business.

There may not have been an exodus but some have left and others will have cancelled, postponed or scaled back their plans to set up in the capital. As important are the short term work visas for highly-skilled staff from outside the EU which are being denied too frequently. Slowly, London is losing its lustre, as Mark admits:
London’s place as a leading financial centre is increasingly regarded – both in America and in Asia – as weakened. If we cannot effectively argue our corner within the stagnant EU, what hope do we have of competing with Hong Kong, Singapore, Shanghai and emerging financial centres in India?

When he talks about arguing our corner in the EU, he is referring to whether the London-based European Banking Authority will have authority over systemic risks (investment banks, insurance, hedge funds and private equity) or whether these will fall under the Paris-based European Securities & Markets Authority. With the overwhelming majority of firms in those industries based in London and not Paris, it would make sense to have their regulation conducted from London, too. But that is often not the way EU institutions are formed.

The Government should listen to Mark Field and lobby hard to ensure both that Britain’s single most important industry is regulated from London and that the damaging 50 per cent tax and bonus taxes are dumped as soon as possible. This will be important as we move from the recovery to the growth phase of the economic cycle but – as we saw from the devastation caused by inept regulation and poor policy in this recession – it will seem even more important when the next recession comes.

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