David Dawkins talks politics and wealth, and asks if the City’s Corbyn-phobia is entirely justified
It’s a question I find myself asking daily: just how did a mild-mannered, allotment tending, carrot-picking Marxist like Jeremy Corbyn cause London’s private client world – a small village at the centre of global finance – to lose its mojo?
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I work as a journalist and researcher, peering under the hood of wealth managers, family offices, lawyers, prime property sellers, tax, trust, philanthropy and succession experts, and I can say without doubt that ‘Corbyn’ is the City’s new favourite (and for them, the most vulgar) C-word.
As C-words abound, the City’s Corbyn consensus (or confidence crisis) is in short, a deeply held and widely spread opinion that a Labour government would (to scratch an ideological itch) seek to punish the City for its perceived muscular ‘neo-liberal’ or ‘market fundamentalist’ ideology, and its role in the catastrophic wrongdoing that led to the 2008 Financial Crisis.
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Their specific fears revolve around the threat of a ‘wealth’ tax and a rise in income tax, and even some form of capital control. In short, a Corbyn-led Labour government would end London’s position alongside New York and Singapore as a global financial centre, and Britain would be an altogether poorer country for it.
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It’s a question of continuity – part of the City’s life-blood – and a sapping value in the era of Trump, trade wars and Brexit as markets needily paw politics for sentiment, looking for the slightest sign of to how to price their wares against the changing dynamics of the world to come. Corbyn’s words suggest a break in this continuity, and the end of London as a global capital for wealth, talent and services: the great pools of liquidity in which they all sit.
In my day job I speak with private client professionals on the subject almost daily and as Brexit hyperbole fades in and out, the Corbyn consensus fills in the gaps. From London’s prime property world – a modern Monopoly map Elysium for the global elite spanning Mayfair, Kensington, Knightsbridge – Glentree’s Trevor Abrahmsohn tells Spear’s that Corbyn views bankers, business leaders and self-made billionaires as ‘the grand Satan of society’, describing the Labour leader as a ‘Worzel Gummidge-like man’ … ‘anti-business, anti-royal, anti-defence, anti-American, anti-EU, and anti-Semitic’. While over in the investment world Iain Tait, head of private investment at London & Capital told Spear’s last month that his clients are now so concerned over a potential Labour government they are actively seeking ‘to reposition their liquid wealth outside of the UK’ – perhaps the early signs of the capital flight to come.
As such, City chiefs are wading into politics like never before with wealth manager, Brexit campaigner and founder of SCM Direct Gina Miller telling me via email (before Labour’s decision to support a second referendum) that, for her Corbyn and Labour are ‘the problem’ and not a solution to it.
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Miller writes that Jeremy Corbyn’s ‘student common room politics’ i.e Venezuela and nationalising the railways, are ‘clearly the last thing we need on top of leaving the EU’. On the issue of post-Brexit prosperity, she warns that ‘the trade we will desperately be chasing after we sever our ties with our greatest trading partner will be hard enough to find without us also simultaneously involving ourselves in some pre-pubescent attempt at overthrowing the capitalist system.’
For Miller more taxation on business – and on the wealthiest in our society – is fine in principle but she says, ‘Corbyn doesn’t understand that wealth creators and major employers are not obliged to stay in the UK. I know from conversations I have had with a great deal of them that they would see Corbyn’s election on top of Brexit as the last straw.’
Returning to Brexit, in quite a stinging rebuke, Miller tells Spear’s that the ‘real victims’ of Corbyn’s policies will be ‘the poorest and most vulnerable in society’, adding that the Remain Labour group have themselves admitted that the party’s updated Brexit policy would on its own result in the UK losing around £24 billion a year over a decade. ‘This will result in austerity created exclusively by Labour.’
Corbyn, she adds, ‘is not the answer to any of our problems. He is the problem.’
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But does the private wealth world and the City of London have a problem of its own making? Its recovery from the 2008 Financial Crisis has been too effective and (when compared to the rest of the UK) too fast. There’s a feeling that we missed that national reconciliation moment, when the City looked the ordinary folk of Great Britain in the eye and promised change.
But no change came.
Research last year from Sheffield Hallam University (Jobs, Welfare and Austerity) looking at the difference between the City and the rest between 2010 and 2016 points towards a demoralising gulf between the capital and the rest of the country during the post crisis years. Authors Christina Beatty and Steve Fothergill point to jobs growth in ‘old industrial towns’ ranking at 2.1 per cent compared to 7 per cent in the ‘main regional cities’ and 14.5 per cent in London.
But the City would argue that its recovery has little to do with the demise of British Industry. They say that finance has become the UK’s beating heart, and that Corbyn’s naked hatred for the City is based in little more than the politics of envy. And it’s true, finance is – rightly, or wrongly – a big muscle in the UK economy.
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The private client world is happy to cite the City’s contribution to the UK’s national income (or Gross Value Added, GVA) estimated at £49.2 billion in 2016, while London accounts for £408.5 billion or 23.4 per cent of the UK’s GVA for 2016. The UK’s financial services sector made a total tax contribution of £72.1 billion in the taxes in the year to March 2017, equivalent to 11 per cent of total UK government tax receipts. This figure includes taxes paid, as well as taxes collected, by the sector. As such, the UK’s financial services sector contributed over £115.3 billion to the economy in 2016 and taken together with professional services, financial services contributed £197.5 billion to the UK economy in 2016, accounting for 11.3 per cent of total output. The figures are compelling, and City professionals are right to cite just how important they are and how fruitless it might be to attack one of the last truly world-class sectors of our economy for the sake of addressing an imbalance they neither see nor feel.
But utterly uninspired by business-minded Conservative noises (or lack thereof) the Square Mile sits under a fog of Brexit uncertainty: inert, confused, and increasingly concerned. Out of this the Corbyn consensus has emerged, fuelled by the nagging fear that someone who thinks differently, might (for once) not fail.
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However there are those, not only on the left but from all side of the political divide, seeking to question the City of London’s consensus on Corbyn. ‘I find myself struggling to be that scared by the prospect of a Corbyn government,’ former chairman of Goldman Sachs Asset Management and former Conservative minister Lord (Jim) O’Neill told The Sunday Times last year, adding ‘[Labour] have captured the mood. It amazes me that so few right of centre have managed to grasp these issues.’
While on the left, Costas Lapavitsas, professor of economics at the School of Oriental and African Studies, University of London, once elected as a member of the Hellenic Parliament for the left-wing Syriza party in 2015, makes his position clear – when it comes to Corbyn, the City is overreacting.
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‘I don’t expect I can persuade very rich people that this is the path they should follow’, he says, when we meet in his campus office, surrounded by the hefty Japanese tomes of his University day job. ‘But I do expect a bit more calm on these questions. ‘And’, he adds ‘some understanding that what might be good for an individual investor, might not necessarily be good for the country.’ And therefore, what’s good for a country is almost never bad for the market.
Lapavitsas is the author of a new book titled The Left Case Against the EU, and, it can be safely said, is one of the few people you’re likely to meet (certainly on a University campus) who’s outwardly positive about Brexit. ‘For me Brexit is a unique opportunity created by the British people, for the benefit of the British people’ in particular he adds for those in the aforementioned former industrial towns, ‘the poorest strata, the strata with in practice has been proven to have the strongest democratic sensitivities and sensibilities.’
Although I’m not here to talk Brexit, he describes the prospect of a second referendum as ‘the biggest disaster for democracy in this country for a very long time’ adding that ‘far from being an explosion of racism, nationalism and backwardness, the Brexit vote indicates that there is still a fundamental yearning for sovereignty and democracy among ordinary people. No doubt it has taken a bad turn – but that’s not the fault of the people.’
So how credible is this Corbyn consensus? He’s happy to see the City chiefs squirm but claims Corbyn’s policies are merely ‘mild Keynesian’. He tells Spear’s, ‘I took part in the discussions drafting the Labour manifesto 2017 – I’m aware of the debates that are happening right now. The world has become so unequal – shamefully unequal. I’m not surprised that the very privileged [clients of wealth managers] would baulk at Corbyn’s ideas.’
However, crucially, he sees a difference between the policy promises and the perceived threats. ‘When you actually look at the politics and the policies proposed by the Labour party in the manifesto – the basis on which Corbyn surged ahead – there’s nothing more than reasonable, fairly mild Keynesian. Anyone who’s read it will realise what Corbyn’s trying to do is embrace policies from the years of rapid growth – the 60’s and [early] 70’s.’ For Lapavitsas it appears as ‘Bolshevism’ to many people – ‘who react in panic’ – only because public and political debate has moved so far in the direction of so-called ‘neo-liberal conservatism’ that people ‘automatically comply with’. For Lapavitsas, the City’s consensus view that the manifesto was ‘somehow socialism’ and a ‘threat to the existing order – to be fought and opposed at all costs’ is ‘just nonsense.’
John Mills, Labour Party member, major party donor, economist, entrepreneur and political commentator, (recently seen in the Channel 4 drama, Brexit: The Uncivil War) tells me that the City’s fears over a Corbyn / McDonnell government are ‘very substantially exaggerated’. Appealing to common sense, he adds, ‘no British Government can afford to not get on with the British business community.
‘John McDonnell is determined to make a success of his time and to make the economy grow like never before.’ He admits that ‘there may be some increase in taxation on the very rich’ but [when it comes to wealth creators] ‘it’s important that the country as a whole is at ease with itself on this issue.’
For Mills, the concerns of City wealth managers are minor in comparison to the problems facing the country. He talks of a need to re-establish industry and address the huge balance of payments problem. Mills warns that the UK ‘can’t pay our way in the world’ and enormous regional disparities have emerged as a result of British industrial decline.’ He adds, ’there’s a huge amount of talent being wasted all over the country because intelligent and skilled people simply don’t have enough to do. If the Labour party was successful in rebalancing the economy and bringing industry back from 10 per cent to 15 per cent of our GDP that would be a huge improvement’.
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When questioned on Labour’s approach to the finance world, Mills recognises the need for change but warns that Corbyn must not ‘attack the City and attack the service economy too much because’ rightly or wrongly, ‘that’s what we depend on’.
‘We need to strengthen the manufacturing side of the economy, rather than weakening the other sides.’
What’s clear here is that the UK very obviously has a problem. The City can’t be weakened, but the difference between the City and all industry north of Watford must be addressed. Although the nation remains divided over Brexit, there’s an obvious social consensus that something’s not quite right about how the UK makes its money. While the City’s Corbyn consensus is born out of a fear that the ‘weakening’ of the City is an ideologically motivated Labour policy, perhaps the answer is for the City itself to move away from what it knows best and embrace the national consensus, re-balancing the economy, reinvigorating industry and closing the north-south divide. In short, dealing with what it knows rather than guessing the market’s reaction to Corbyn, Brexit, Trump, wars and the many complex variables about which we all remain clueless.
David Dawkins is a Senior Researcher at Spear’s
Illustration by Adam Dant
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