LIFE could become even more difficult for the financial sector in the coming year. The fundamental forces shaping UK politics threaten an aggressive new round of regulation and taxation. These forces derive from a steady growth in envy and parochialism in politics, and the weakness of capitalist voices within the wider conservative movement.
After the financial crisis began, politicians blamed an unregulated banking sector for the mess. Despite the vitriol levelled at the banks, the main result was not excessively harsh, broad-brush regulation, but the targeted measures outlined by the Vickers Commission.
Over the last few months, however, we’ve seen an ominous change in the tone of the political debate that could affect the financial sector more seriously. As conference season showed, debate is focusing more and more on the apparent iniquities of wealth and success. In one of its highest-profile announcements, Labour announced plans for a new “mansion tax” on larger homes, and the party looks certain to campaign for a reintroduction of the 50p rate of tax. Lib Dem leader Nick Clegg announced plans to raise capital gains tax on the wealthiest.
Add into this mix the media’s recent focus on foreign premium property ownership, concerns about London’s economic dominance, the rise of Ukip and the attention this has drawn to challenges posed by free movement of labour, and visible nervousness of rich Tories at the top of the party (not unreasonably) to do anything that looks like defending “their friends”, and you have a widespread populist movement no one seems willing to stand up against.
Politicians are deliberately cultivating a backlash against the rich that could give the parties carte blanche to move against the financial sector more broadly, in the form of tax hikes and new legislation to limit the industry’s actions.
Let’s put aside for a moment the non-negotiable issues of executive pay and bonuses – issues the financial sector should address but won’t – and be realistic. What should banks do to strengthen their position in the coming year?
Above all, banks need to make it clear that they’re part of the fabric of ordinary British life. Forget showing that top bankers are patrons of the arts and major philanthropists. Those pictures of perfectly attired senior executives outside parties and fundraisers are a mixed blessing at the best of times, but are particularly ill-advised now. Forget, too, abstract arguments about the sector’s importance to the economy. If that wasn’t self-evident before, it’s not going to cut through now.
The challenge now is different: banks must remove the ability of politicians to portray them and their staff as being separate from the rest of us.
This requires two things: first, banks need to drive home the point that they’re not simply rich institutions based in the City and elsewhere in central London. They must make it clear that they support the livelihoods of workers in towns and cities across the UK. How many politicians and journalists, for example, know that JP Morgan has a major office in Bournemouth, that UBS is in Newcastle, that Deutsche Bank is in Birmingham, or that Morgan Stanley has an office in Glasgow? Very, very few, I would imagine.
Senior executives need to start talking about these places and getting them on the map in the interviews and speeches they give, as well as actually making high profile speeches and announcements from these venues.
Secondly, banks need to find ways of giving a more human face to their businesses. Being more vocal in talking about their regional locations is important. But banks need to start making their local voices heard by providing a platform for the ordinary people they employ. In practical terms, they should make far more of these offices on their websites and on social media, with local people giving their views on what it’s like to work in their Newcastle or Birmingham office.
More powerfully, they could also start to use local workers as spokespeople in their local areas and nationally on behalf of the wider financial sector. Instead of either avoiding debate altogether, or putting on an Oxbridge-educated economist, banks should consider using their best regional spokespeople on TV – people with a more authentic view of the economy.
In short, the financial sector needs to change what politicians, the media and, above all, the general public think about when they hear the words “bank” or “bankers”. They need to be careful about how they choose to defend their sector, making it clear that “the City” is shorthand for an industry that employs vast numbers of ordinary people across the country – people that struggle with their bills like everyone else.