For years, the French have resented the success of the City of London. It has become the Rome of the globalised world, where the best financiers flock to do business, make money and pay tax. When Britain wisely stayed out of the eurozone, the City consolidated its lead as Europe’s only world-league financial centre. The best French financiers climbed aboard the Eurostar and headed north. Today, when you enter the quant trading division of firms like Barclays Capital, you hear the finest minds of the école Polytechnique speaking French to each other.
It is fashionable, nowadays, to declare this to have been a fraud, the City little more than a casino and the wealth it created illusory. But however much Nicolas Sarkozy might like this to be true, he knows it is false.
He may regard the City as a Petri dish of rentiers and their parasites. But he cannot question the tax revenue which is, even now, being paid to the Exchequer and not to the Elysée. The banks may yet bankrupt Britain. But fund management, insurance, hedge funds and currency exchange are all recovering. And so the French are acting now.
In what may be the single most damaging consequence of Gordon Brown’s diplomatic failure, the French have claimed one of their own, Michel Barnier, as European commissioner. Sarkozy’s words speak best for themselves: ‘Do you know what it means for me to see — for the first time in 50 years — a French European commissioner in charge of the internal market, including financial services?’ It means the French now have the whip hand over the City and that a massive onslaught of regulation is on the way to destroy what Sarkozy describes as the ‘free-wheeling Anglo-Saxon’ financial model.
Now the Lisbon Treaty has been passed, Britain has almost no weapons left with which to defend itself. Sarkozy cannot contain his glee. As he says, Britain has been the ‘big loser’. Barnier has naively spoken about promoting Paris and Frankfurt as financial sectors. They have no chance. London is Europe’s only hope when it comes to competing with New York and the growing Asian financial centres.
Rather than defending the City, the Conservatives are adding to the attack with the pointless and vindictive 50p tax on the super-rich. Their decision to keep this tax, expected a month before an expected Conservative victory, means that George Osborne is more interested in political symbolism than raising funds. The 50p tax will mean less revenue, as all independent studies show. Osborne’s deputy, Philip Hammond, is now describing the 50p tax as a ‘solidarity tax’. The Conservatives’ intellectual capitulation is complete.
With one honourable exception. There is a Conservative, arguably the most powerful in the land, who has fought for the City and against the 50p tax with vigour and brio. The Mayor of London is under no illusions about how easily the golden geese which enrich the City can fly away. He has fought a one-man campaign against hedge-fund regulation. He is not anxiously trying to avoid political traps. He is not imprisoned by his background, or haunted by accusations that he is ‘banging on about Europe’. He has acted with conviction and leadership — setting an example that the Cameron government would do well to follow. There is much at stake. Like it or not, we are about to enter a battle for London.
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