As the Mayor's Economic Advisor, I believe the public mood shows war on bankers isn't over yet...
Well, that’s it then. The government and industry have declared a covert ceasefire. The war on bankers is now over. Or is it?
The Independent Commission on Banking’s interim report was more benign for the competitiveness of the industry, and London as a financial capital, than we had been led to believe. The rhetoric from the government is now more emollient – they openly recognise that it is in Britain’s interest to be host to the world’s financial capital.
But there is a big elephant in the room – the mood of the public. And there the news is far from good: the public do not think the war is over. In fact, unpublished research for theCityUK, the financial services representative body, shows that public hostility to bankers is actually increasing. The general mood is said to be 'vitriolic'.
The problem is that many people are genuinely suffering. Even if the economy staggers back to its feet, this is going to be a more difficult year than last year. Real incomes are falling as pay lags behind inflation, and taxes are rising to fill in the government deficit. VAT is up, as are fuel prices. The middle is being squeezed. Since the beginning of the financial year, the public sector cuts are turning from theory to reality. Across local and national government, workers are losing their jobs, libraries are closing and services being withdrawn. The government had no alternative, but rebalancing the books was never going to be pain-free.
This is a time of anxiety for the public, and they are looking for someone to blame. Bankers – or financial service workers in general – are the obvious culprits. And exactly how are they sharing the pain? Well, the financial services industry took its hit three years ago, and is now leading the country in recovery. Business is getting brisker, profits are rising, banks are hiring again – and, as RBS’s Stephen Hester can testify, bonuses are being paid. For the public, this is a red rag to a bull. Even arguments that we need financial services because of all the jobs they create apparently fail to win people over.
The industry cannot let up in the face of this continuing public hostility: it has to show to the public the benefits they bring. Partly that is about ensuring their customers are satisfied, but also about proving their benefit to the country by deed as well as word. As the Mayor put it last year, the masters of the universe need to show they are servants of society. Until they convince the public of that, the war won’t end.
This article by the Mayor's Economic Advisororiginally appeared in City AM, London's free daily newspaper on 21 April 2011.