Does Brown Really Think He Can Woo The City?
The Chancellor says he'll free business taxes and cut red tape. But will he be forgiven for what he has done to the pension industry?
Something seismic has happened to the Chancellor, who shows every sign of falling in love with the City. The first indication came in May when his close aide Ed Balls assumed responsibility for the Square Mile in his new portfolio as Economic Secretary – and when on a charm assault proclaiming City bonuses are good for tax revenues and job creation.
The love-in now appears to have culminated in a summit with City grandees, who are determined to address the tax and red tape burdens they claim threaten London's dominant position in capital markets.
The Chancellor, it seems, has finally come to realise that banking and finance matter more to the economy than fruitless efforts to keep industries such as motor manufacturing alive.
Brown is clearly keen to keep the City on side – hence his pledges to freeze business taxes, prevent the introduction of Draconian US-style regulation and prevail on the FSA to cut red tape by a quarter very soon.
He seems to have succumbed to the usual whines from groups such as the CBI, which has warned of a mass exodus of blue chip companies if taxes aren't cut. In fact, Brown has cut corporation taxes: the UK's tax-to-GDP ratio is still way below both its 1982 peak and the current EU average.
And surely most citizens approve of red-tape burdens such as those curbing pesticide use and money laundering. Besides, how bad are these burdens? In its recent World Economic Freedom league, based on tax levels and regulation, the right-wing US Heritage Foundation moved the UK up to fifth place – above the US and the rest of G7.
The truth is that however much Brown tries, he'll always struggle to overcome the personal loathing many in the city feel for him – fuelled by the collapse of Britain's occupational pension industry.
The true cost of Brown's 1997 pensions grab is only just beginning to emerge. Some estimates now put it at £100bn-£150bn – a level of damage impossible to undo.
City sentiment is drifting away from Labour generally and Brown in particular – a trend that will accelerate if the Conservatives come good on promises to scrap stamp duty on share trading.
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