Better the banker you know

By Chris McCarthy

It is an unenviable task being a politician, expenses scandal or no expenses scandal, least of all when you find yourself between a furious rock and an unrepentant hard-place, as the Chancellor currently does. With news that Alistair Darling plans on announcing a ‘super bonus tax’ in tomorrow’s Pre-Budget Report, it is clear that the Labour Party is planting its flag ostensibly on the side of the electorate – but at what price to the country’s long-term interests?

It is broadly accepted that without the injection of billions of pounds of capital funds, loans and guarantees by Government, the UK financial system would, in all probability, have collapsed. The consequences this would have caused are difficult to fathom and the banking sector owes a huge debt to the British taxpayer, the size of which is only inflated when you recognise that the crisis was largely a product of banking practices over the last 15 years. It was not your average John Doe trying to purchase his first home for his family.

I accept that it would be lazy to drop all responsibility for our current predicament at the feet of our country’s bankers – the laissez-faire approach of the Conservative Government in the 1980s liberated the banks to take the risks they subsequently did and our level of national personal debt has been unsustainable for many years. Blame can be apportioned to many, but the greatest proportion of culpability rightly rests on the shoulders of those whose hunger for short-term profiteering endangered our long term economic health.

Britain’s financial services industry has been one of our greatest assets and exports, so much so that we became over-reliant on it, allowing ‘old’ industries to die and failing to spot the emergence of new markets in areas such as renewable energy and high-end manufacturing. Without the hospitable environment The City has provided to domestic and international business alike, we would not have witnessed a decade of profligate public-spending under Labour since 1997.

Now we find ourselves dependent on them once more. The banking sector has seen the quickest return to profitability of any industry in the UK and while it is sensible and responsible to plan for an economy with greater diversified risk, the announcement of a levy on bonuses does little to tackle the underlying problem while potentially exacerbating the symptoms. Banks will take their business to more welcoming environments and top-bracket tax payers will follow.

It is very tempting to say ‘good riddance’, given the mess the banks have created, but at what price do we exact vengeance? The moral high ground is all well and good in theory, but it won’t be such a pleasant place to be when mired in public debt, rising unemployment and prolonged under-investment in public services.

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