Every time George Osborne announces a minor upwards tweak to the bank levy, a section of the City reacts as if the chancellor has declared an ambition to drive the money-changers out of London’s financial temple.
Nigel Wilson, chief executive of insurer Legal & General, took up the cudgels at the weekend. Osborne is “repeatedly going back to the well to extract funds through a bank levy, a move which ultimately risks forcing banks to relocate outside the UK”, he said.
JP Morgan Cazenove’s bank analysts even crunched some numbers for Bill Winters, Standard Chartered’s incoming boss, to ponder. The levy will reduce the bank’s earnings by 13% in 2017, they calculate, and thus “a strong case for re-domicile is now on the table”.
Really? Where are Standard Chartered and the other supposedly put-upon banks meant to run to?
Bailed-out lenders Lloyds Banking Group and Royal Bank of Scotland are clearly going nowhere. The same, almost certainly, applies to Barclays, whose assumed flirtation with the US a few years ago was under a previous management with a greater love of Wall Street.
That leaves HSBC and Standard Chartered, the Asian-focused duo. How about Hong Kong? It’s not plausible. Changing domicile requires the board to take a 30-year view, at the minimum. If you think UK politicians are capricious, do you really trust their counterparts in the People’s Republic of China? Of course not: being regulated in a stable democracy is worth a lot to a big bank.
Singapore is the usual alternative offered by the emigration lobby. But does Singapore want to house mega-banks? Is it capable of doing so? Standard Chartered has a $725bn balance sheet, big enough to swamp the country in a 2008-style crisis. Singapore, currently reflecting on 50 years of prosperity, would surely demand capital cushions so large that they would undo most of the benefits of escaping the UK levy.
The US isn’t likely either. For both HSBC and Standard Chartered, after their run-ins with local regulators in recent years, it would be like stepping into the lion’s den.
In any case, what’s the fuss about? Osborne’s justification for raising an extra £900m a year from the bank levy seems reasonable: during the financial crisis the UK bent over backwards to support the banking industry, not only pure domestic lenders, so he would like the public purse to see a tangible benefit.
The current round of grumbling about the levy is pitched at higher volume this time. But one suspects the outcome will be the same – the banks will conclude that UK regulation is worth paying for.
Good news for FirstGroup: it’s finally won a rail contract. Sort of. The contract to run the Great Western franchise until April 2019 is actually a direct award from government, rather than a victory in a competition against rival bidders.
They all count, of course, and the terms on this one – just £68m to be paid in premiums – look attractive. Back in 2011 the company declined to take up an option to pay £800m over three years to keep the Great Western franchise. Its reward was a cheaper extension. Now it’s got another, thanks to the government’s desire to stick with the incumbent while the line is electrified. No wonder the shares rose 4%.
The shadow transport secretary, Michael Dugher, called it a “stitch-up” that “makes a mockery of the current franchise model”. He’s right, up to a point. The system has been shambolic since the cock-up on the west coast in 2012 when FirstGroup got the gig but Virgin successfully challenged the award.
Yet Dugher would do everybody a favour by being clearer about what he means by putting the current franchise system “in the bin” and creating a railway that is “more publicly controlled”. He’s not talking nationalisation, that much is known. And Dugher wants a public sector operator, or bidder, of some form.
But would a Labour-led government, when push comes to shove, really turn down offers from the private sector of, say, £3bn over seven years to operate the upgraded west coast line? That would be serious money. You would have to be very confident indeed that your in-house operator could do a better job.
Morrisons has decided something called “the intelligent queue management system” is not very intelligent after all. It is binning infrared sensors and letting staff use their eyes to decide when to open and close checkouts. Call it a small victory for common sense. In fact, it’s astonishing that Morrisons persevered for six years with an obviously duff idea.
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