THE INTERNATIONAL Monetary Fund’s recent report on how the financial sector could make “a fair and substantial contribution” towards the cost of any future bailouts surprised many commentators by outlining two new levies, rather than the one expected.
The “Financial Stability Contribution” is essentially a flat rate bank levy on balance sheets, specifically their liabilities, which would be paid into a bailout fund or used by the government in its day-to-day budget. Meanwhile the “Financial Activities Tax” would be levied on the sum of the profits and remuneration of financial institutions and paid into national budgets.
We all acknowledge the real anger that exists as a result of the mistakes that were made, but it is important to remember this crisis was not the fault of banks alone. And the danger is that by taking money out of the global financial marketplace we could reduce the availability of credit that is currently driving the economic recovery.
Therefore any reforms need to be rigorously assessed and carefully targeted. Punitive measures could have severe unintended consequences for the wider economy, or give a false sense of security.
We need to work towards creating a stable regulatory landscape that minimises systemic risk but is also open for business.
The only way this can be achieved without undermining the City’s competitive position is through international agreement and enforcement.
Unilateral action and regulatory arbitrage would be particularly damaging to the UK given that the financial services industry contributed 12.1 per cent of total tax revenues in the fiscal year ending 2009.
I hope finance ministers – particularly those from jurisdictions facing similar issues and pressures to us, including the USA and Europe – at last week’s G20 meeting in Washington took this into account when deciding how to act upon the IMF’s recommendations.
While it will not be easy to align the various interests of so many countries, the G20 can and must secure consensus among today’s major economic players.
In addition to the financial services industry, the City has a relatively little known, but growing cultural economy. The City of London is home to many important listed buildings and impressive art collections including, of course, my home for this year, Mansion House. Add to that the Barbican Centre, the Museum of London, the Guildhall Art Gallery, the Livery Companies and the City Churches.
A few days ago I welcomed senior figures from the arts to a lunch at Mansion House to discuss ways in which my mayoralty can become more involved in this growing area. One idea is creating Lord Mayor’s Cultural Heritage Scholarships, offering young people six-week placements in this field. We are now working on how this might be taken forward in order to encourage people to consider careers in this increasingly important sector.
Nick Anstee is Lord Mayor of the City of London