A Crusade or Nothing: Brown and the Banks

It is seen as punitive, a populist reaction. There is little doubt that some people in the City end of London will think so. But Gordon Brown’s government is intent on winning votes by ‘supertaxing’ banks, exercising a veto over the payment of company bonuses, and holding the ‘frontline’ against slashes in services. The Chancellor of the Exchequer, Alistair Darling, also has the Tories in his sights, warning the public about those who endorse ‘austerity driven by outdated dogma.’

In recent times, the British Prime Minister has been clawing his way back in the polls. One target has presented itself: his Conservative opponent’s class background. When David Cameron’s Conservatives pledged to exclude estates of less than £1 million from the death tax, Brown saw his chance. Such a policy was surely ‘dreamed up on the playing fields of Eton.’ Then, the clincher: ‘This must be the only tax change in history where the people proposing it will know by name almost all of the potential beneficiaries.’ Business secretary Lord Mandelson has also weighed in with the remark that one might not be able to choose one’s school but certainly one’s club.

British Labour is garnering influence amongst its more traditional roots in an effort to prevent going down with all hands in the forthcoming election. Its recent tax policy, suggested in the pre-Budget Report, gives a foretaste about how the forthcoming election will be fought. In addition to the revised tax regime, various groups will hope to benefit. Children, the elderly and the disabled have been promised increased payments.

The banks have been the primary target in Labour’s offensive. While Brown has been disingenuous at stages about his own role in New Labour’s free-market mania, he is now promoting himself as the righteous ‘correctionist’, guardian against financial improprieties. Given that many large banks, most notably the Royal Bank of Scotland, are essentially socialized; given that the taxpayer owns 84 percent of that entity alone, a firm hand from the government is not only unsurprising but expected.

To this end, the British Treasury has announced that it would reserve the right to veto increases to RBS’s bonus pool, and deny executives paid over £39,000 discretionary cash bonuses. They can, however, receive deferred stock. The doors to ‘casino capitalism’, it would seem, are being closed.

Some members of the banking world feel aggrieved. All banks will be affected by these new financial arrangements, whether they received bailout cash injections or otherwise. They can hardly see this policy as unique to Labour. Even the otherwise pro-company Thatcher government levied a ‘one-off’ tax on banks in 1981 at time of high interest rates. Robert E. Diamond, head of Barclays investment bank, has warned of a financial calamity in London with banker fright and flight. The City’s colourful Mayor Boris Johnson has publicly urged residents to accept that even that ‘leper colony’ had contributed a fair share to the country’s wealth. The Liberal Democrats sense another problem: the lure of tax avoidance.

The banking representatives and financial conquistadors in the City will be hoping that Cameron romps home at the ballot box. But the incompetence and sheer bravado of those behind the financial crisis has left an enduring mark. The Tories will also be mistaken to see this pre-Budget statement as a grand suicide note. ‘This was,’ as Benedict Brogan in the Daily Telegraph (Dec 10) observed, ‘crafty politics on a grand scale.’ Britain has been particularly hard hit, and there is little reason to suppose that voters will forget that. Some commentators see a chance for Labour to finally right an increasingly abysmal record on social inequality. ‘Progressive opportunity lurks just around the corner during the most taxing times,’ posed Tom Clark in The Guardian (Dec 9).

Cameron, in contrast, looks like an overly keen Sheriff of Nottingham, raiding the purses of the poor to enrich the wealthy. As Kevin Maguire of The Daily Mirror (Dec 9) proclaimed, Labour had to ‘champion fairness and remember Wilson’s rallying cry: “It’s a crusade or its nothing.”’

Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge. He lectures at RMIT University, Melbourne. Email: bkampmark@gmail.com

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