Osborne’s caved in to City vested interests and Labour’s let him get away with it

by Samuel Dale

Without the shackles of the Liberal Democrats, George Osborne has been set free in his relationship with the City of London. In Mansion House speech in June, he called for a “new settlement” with banks.

The new settlement effectively means less regulation, less supervision and less tax. Big banks and hedge funds have received a rush of goodies from the Chancellor and we have not heard a peep from the Labour front bench about any of it. Not a single moment of pressure.

Here are five key ways Osborne has appeased banks since May:

  1. Sacking FCA chief executive Martin Wheatley

Over the summer Osborne sacked tough-talking Financial Conduct Authority chief executive Martin Wheatley for being too harsh on banks.

He is now on the hunt for someone who will be less aggressive and more agreeable to bank chiefs. This is a major, under-appreciated shift. Banks now know they can just call up Number 11, complain about the FCA and the chief regulator will be out on his ear. The next chief exec will know if they talk too tough then they will lose their job.

  1. Reforming the bank levy

Osborne has shifted the burden of the bank levy from large banks with global balance sheets such as HSBC and Standard Chartered, who can easily get up and leave, and on to smaller banks and building societies, who can’t leave.

From next April, smaller banks will pay more tax, larger banks will pay less, This stifles new entrants and reduces competition and yet the Treasury is standing firm.

  1. Scrapping bank regulation

The parliamentary commission on banking standards was set up in the wake of the Libor rigging scandal in 2013 to fix banking culture. It was led by free market Tory MP Andrew Tyrie and Nigel Lawson was a key member. No socialist firebrands in sight.

Its key recommendation was to overhaul regulation of senior bank executives. This was driven by the total lack of responsibility from senior figures such as Fred Goodwin after the last crisis.

Under the new senior managers’ regime, senior bankers would have to prove their innocence to the regulator when there was major wrongdoing in the organisation.

Regulators normally have to prove someone is guilty before they act but due to the importance and complexity of banking, it was felt they should operate by a tougher rule.

But after heavy lobbying from the industry and global banks, such as HSBC again, that has now been removed. The next Fred Goodwin is more likely to get away with it again next time.

  1. Weakening the banking ring-fence

The key reform to make bank safer was the so-called ring-fence to splits risky investment arms from their retail division.

This week, the Government signalled it would allow money to be transferred between ring-fence entities, significantly weakening it.

Banks such as Barclays are applying for waivers and some fear the whole process is being watered down significantly. This is the key reform to make banks safer.

  1. Watering down non-dom reforms

Most significantly perhaps is the secret backtracking on summer reforms to non-doms. In his summer budget, Osborne launched a much-praised raid on non-doms, which had distinct echoes of Ed Miliband’s plans during the election campaign.

He said anyone living in the UK for 15 of the last 20 years would become domiciled here. But last month, a technical consultation was published that significantly watered down the non-dom tax reforms. It said existing non-doms could keep their money untaxed in offshore trusts even after they become domiciled.

This will save non-doms millions of pound in tax. It means very rich people will live in the UK for long periods under different tax rules. I’m told he did it to stop an “exodus” of hedge fund managers from London.

So where’s Labour?

Osborne has caved in to threats from global banks that they will leave the UK if the regulatory and tax burden continues.

So where is the opposition? We haven’t heard a peep from Labour when this should be their bread and butter. A Tory Chancellor caving into big banks and hedge funds.

Labour should never be anti-business or anti-City but it should not be allowing a Tory de-regulation drive in financial services to go unnoticed and unchallenged.

I’m told John McDonnell has met hedge fund lobbyists and assured them there will be no fresh assault on the sector.

After McDonnell’s shambles over the fiscal charter, does anyone seriously believe he will be able to hold the Government account over complex banking policy changes?

Does anyone believe new shadow City minister Richard Burgon – who did not know the size of the deficit when asked on Channel 4 last week – can hold the Treasury’s feet to the fire?

We know Labour will not win the next election. We know Jeremy Corbyn and McDonnell will never live in Downing Street. But can we at least try and have an effective opposition?

Sam Dale is a financial and political journalist

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14 Responses to “Osborne’s caved in to City vested interests and Labour’s let him get away with it”

  1. Mike Stallard says:

    Perhaps the reason you have no comments is simply this: we do not understand banking!

  2. New Labour happily carried on with the Big Bang reforms with light touch regulation of the City through to 2008. Funny that Dale uses Tory banking policies to attack Corbyn and McDonnell, isn’t it?

  3. Tafia says:

    If the PLP spent a bit more time backing Corbyn and the membership instead of behaving like c**ts and making themselves unelectable then perhaps Labour would be able to string a coherent opposition together.

  4. Mac says:

    “Labour’s let him get away with it” because there are too many Red Tory entryists in the Labour Party.

  5. Janice says:

    The speed with which Martin Wheatley was removed was strange to watch. However, I checked Richard Burgon’s twitter feed to see if he was settling into the new job after his skewering on channel 4. His tweets are about tax credit cuts and retweets of momentum tweets.

    Maybe Andrew Tyrie will ask some difficult questions at the next Treasury select committee meeting…………

  6. Ex Labour says:

    @ Mike Stallard

    There are no responses because its the usual diatribe against banks and financial institutions with a swipe at Osborne for good measure.

    Labour politico’s do not understand the importance of the city to the UK economy. They also like to propagate the myth that everyone in banking earns millions per year. In short the city is an easy target to try to whip up some vitriol.

    The city generates huge tax revenues which are spread out across the UK to the benefit of many areas including Labour strongholds. Politico’s such as the author would soon be howling should the banks decide to leave and the money for their pet projects disappear and jobs be lost in their communities.

  7. 07052015 says:

    Yes the power of finance to get what it wants is clear from the above.

    You would fear that with steel pretty much gone ,a massive and growing visible balance of payments deficit -finance will be the main driver of the economy .That means lower growth and a likely denouement where england ends up on its own outside europe and trading as a tax haven.Sad stuff.

  8. Chris says:

    WOW a post on Labour Uncut that actually attacks the tories!!!

    @Ex Lab

    Your comment is the usual diatribe! Whereas the points raised in this article are well justified criticisms of Osbornes backsliding on regulations he committed to implementing.

    As such a regular reader of uncut I would have thought you would know that the writer is actually virulently pro finance.

  9. Lizzy Salander says:

    “On it’s own outside Europe and trading as a tax haven.” – Switzerland, a poverty ridden shithole, who would want to live there?

    PS…Watching the last PMQ’s, I got the impression that the Prime Minister has already got bored of Comrade Corbyn’s emails from his fanatic club 😉

  10. Tafia says:

    Lizzy, Prime Minister has already got bored of Comrade Corbyn’s emails

    But the public aren’t. He’s now more popular with the general public than Ed Miliband at his peak.


  11. Heidstaethefire says:

    No change since the eighties, then.

  12. Daniel Vulliamy says:

    Good content; nasty tone.

  13. anosrep says:

    “We know Labour will not win the next election. We know Jeremy Corbyn and McDonnell will never live in Downing Street.”

    We know nothing of the sort.

  14. Lizzy Salander says:

    “He’s now more popular with the general public than Ed Miliband at his peak.”

    I must agree with you.

    Comrade Jeremy “Broadchurch” Corbyn is even very popular with the Conservatives and Ukip. They are quite satisfied with him as leader of the Labour Party.

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