It took the loss of the Massachusetts ‘safe’ Senate seat to get Obama to do the right thing. God moves in mysterious ways his wonders to perform! So what do we need to get a UK ‘Volcker’s rule’ (stopping banks taking deposits from running hedge funds or making private equity investments or using their own money to gamble on the markets in proprietary trading)? A lot more than the ultra-cautious Brown-Darling defensiveness towards the City of London. Darling’s ‘living wills’ requiring banks to have clear contingency plans to wind themselves down in the event of drastic failure is yet another gesture succumbing to City lobbyists. Yet the remedy that applies in the US applies in spades in the UK. The US is now well ahead of the UK (and of Europe) in dealing toughly with the banks to prevent a further and even more dangerous collapse. So why is the Brown government so timid in the UK?

Obama is imposing a levy on the banks to recover the $75bn bail-out payments – compare the UK tax on bankers’ bonuses which will raise just £0.5bn. Obama is largely re-introducing the Glass-Steagall Act to split retail deposit banks from casino investment banks; Brown is still refusing to contemplate any such obviously necessary measure. The US has already taken far more robust measures to force tax haven disclosures; the UK is still far too protectionist towards City of London offshoring and tax evasion/avoidance, including the massive 18% CGT tax-break. Why?
There are several reasons – New Labour has an atavistic fear of public intervention in the private sector – witness the costly and wasteful 6-month delay resisting the nationalisation of Northern Rock till it became inevitable. Brown and Darling continue to regard the City of London as the goose that lays the golden egg – the £25bn a year corporation tax previously contributed by the finance sector before the crash, conveniently ignoring the £870bn national debt inflicted by the banking collapse. New Labour’s obsession with Middle England, embrace of a get-rich-quick philosophy and love of wealth instinctively attracts its leaders to the mores of the City. Which are all reasons why New Labour (and probably also the Tories) cannot now rebalance the economy and shrink the finance sector in favour of a major strengthening of the production base, which is a fundamental pre-condition if Britain is to revive.

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