Boris Johnson has branded government plans to overhaul the banking sector as “nuts”.
The Mayor of London says that proposals such as capping bonuses and breaking up banks into retail and investment divisions will hobble the City and ultimately reduce the ability of businesses to raise capital.
Johnson points out that the UK's financial sector produces 9% of Britain's annual GDP and 13% of "value added" in the economy. Implementing some of the proposals mooted by the new Conservative-Liberal Democrat administration will cause financial giants to move their HQs overseas to more favourable regimes.
Speaking at the Google Zeitgeist conference near London, he says: "I think it is completely nuts for people to want, as a matter of public policy, to attack the financial sector. We need a great City where business can raise capital in order to expand and I will continue to protect that."
It is completely nuts for people to want, as a matter of public policy, to attack the financial sector
Mayor of London Boris Johnson
The new government has announced an inquiry into the future of banking in the UK that will report next year.
The new Business Secretary, Vince Cable, has been one of the sector’s most vociferous critics since the financial crisis. Reflecting public anger, the popular Lib Dem has called for bonuses to be capped and banks to be forced to lend to businesses and households.
Banking leaders, who insist that Cable’s proposals will decimate the UK banking sector where "universal services" across retail and investment are the norm, might have been reassured last week that sources close to Osborne said the Treasury was going to remain in charge of banking policy and the financial services sector.
However, Osborne also sought to articulate popular anger about the banks throughout the election campaign and the Conservative Chancellor has agreed to a banking levy, a crackdown on "unacceptable" bonuses, a plan to encourage more lending to small businesses and to encourage the creation of more mutuals to foster more competition on the high street.
But unlike Cable, the Chancellor has said that he would only consider breaking up the banks if it was part of a coordinated global move.
Boris Johnson is a staunch defender of the City, as evidenced by his impassioned contribution to a debate in the Guardian with Will Hutton, who has just been recruited by David Cameron to run a ‘fair pay review’ to ensure public sector bosses are paid no more than 20 times the amount of the lowliest employees.
Acknowleging public anger over the financial crisis, Johnson attributes the financial crisis to “huge mistakes and grotesque errors” rather than regulatory failings or structural deficiencies. Adding that “not all of them have paid a sufficient price and there are things to be criticised", the implication seems to be that the remedy lies in punishing individuals rather than restructuring and penalising the City as a whole.
