Financial Services Bill

For some centuries past the City of London's greatest attraction has been its international reputation as a bastion of commercial certainty and reliability. English law is respected across the globe: countless contracts between parties from far away continents are often drawn up under its jurisdiction. In commercial affairs the City of London is rightly seen as a watchword for justice, neutrality and fairness. Too much, I fear, of what is proposed in this Financial Services Bill flies in the face of this fearless and hard-earned reputation. It threatens to do untold damage to the United Kingdom as a commercial and trading centre. Even in the face of two world wars, the City of London regarded with the utmost seriousness its international contractual obligations—even to counterparties from those nations with which we were in conflict. We meddle with this proud history at our peril. I am therefore especially alarmed at the plans to give the Financial Services Authority the power, among others, to tear up future contracts that do not comply with its new arbitrary regulations on curbing remuneration and bonuses. The notion that the FSA might in such a way strike out legal contracts will cause grievous harm to the reputation of English law and the national sense of fair play. It also seems likely to fall foul of international—in particular, European Union—obligations on competition policy. Moreover, these draconian proposals are probably going to be impossible to implement in full. We will then be in the absolute worst of all worlds: putting on to the statute book legislation that gives a clear signal to international trading partners that Britain is no longer such a free or fair place to do business; but also concocting a set of regulations that are, for practical purposes, impossible to enforce. As ever, there seems to be little consideration of the national interest in what the Government propose in this Bill. Instead, we see short-sighted, tactical positioning. At a time when my own party has made it clear that an incoming Conservative Administration would dismantle the Financial Services Authority, the Treasury now seeks to limit our future room for manoeuvre by empowering it even further. The Bill also prompts the obvious question that I put to the Chancellor earlier. Given that the threat of closure hangs over the FSA, how on earth will it be able to recruit sufficiently talented new staff to take on its enhanced responsibilities? It is important that the authority and the Treasury properly think through all the practical implications of the Bill. Its unintended consequence will be that institutions are far less likely to wish to do business on these shores, which will be to our collective detriment in the years to come. The Prime Minister's recent resurrection of the notion and desirability of a Tobin tax at the recent G20 Finance Ministers meeting is further cause for alarm. Promoted as a way of recouping more quickly the taxpayer cash put into banking bail-outs, which at least superficially seems a desirable enough goal, and of rebalancing the economy and helping the poor, as a surcharge on financial services it would in reality fulfil none of those objectives. Unless it were implemented in precisely the same way globally, it would be impossible to put into effect without disastrous consequences for both London and the UK. The United States has already signalled its clear opposition to such a levy, making it more likely that if it were to be applied on these shores, even in a diluted way, business would flee to countries free of the tax or simply engineer new financial instruments to get around it.