Now that we have reached the end of the 2010 Party Conference season, it is perhaps time to take a step back and reflect on some of the rhetoric directed at the City in a calm, rational manner.
The hostile political environment facing financial services is – to a degree – understandable given the public anger aimed at parts of the industry following the crisis, even if others were equally culpable.
This should not, however, so cloud the debate that the contribution of the City – or “tycoons in their glass towers” – is dismissed when it comes to wealth creation.
Of course, the government must promote a mixed and diversified economy, including SMEs. London demonstrates the need for complementary sectors which support each other – so we see design and manufacture, hospitality and retail, medicine and higher education, finance and professional services. These don’t exclude each other. They add value to each other, to London’s success and hence national prosperity.
If we want them all to flourish the City component is essential. We must not drive away investment capital and tax revenues by cultivating the perception that we do not welcome big business or high earners.
This approach would tear a big hole in the UK’s national income. A hole representing eight per cent of output and just over 12 per cent of total tax revenues – or 142 per cent of the interest on the current public sector debt.
And the City’s contribution does not stop there. As speakers from across the political spectrum have stressed, the financial services industry also has a vital role in providing the capital required by businesses.
The banks are working hard to support the recovery by making sure customers know they are open for business, with loan approval rates running roughly in line with pre-crisis levels. The industry now needs more fiscal and regulatory support.
A recent report by KPMG placed the UK above our key rivals as the fourth most highly taxed country in the whole of Europe. Indeed, the introduction of the 50 per cent rate of tax was the highest personal income tax increase in the world last year.
Further uncertainty risks pushing us past a tipping point – where the UK’s well-established business benefits are outweighed by perceived or real future threats.
Only with stability can we get on with what we do best – making the markets work and creating wealth, business and prosperity.
Nick Anstee is Lord Mayor of the City of London