While fighting a regulatory battle against its European partners to defend the City against the assault of President Sarkozy and Chancellor Merkel, Prime Minister Gordon Brown is slowly but surely killing the City. He and Alistair Darling, the Chancellor of the Exchequer (the British denomination for the Minister of Finance) will go down in history as having single handedly played an incredibly negative role in this financial crisis.
This afternoon's announcement in the UK Parliament by the Chancellor in the presence of the Prime Minister of a one-off 50% special levy on any bonus above $ 40,000 is the latest inept decision of a Labor Government who completely discredited the City and killed decades of a great success for global markets.
My advice to the City: don't pay any cash bonuses above $ 40,000. Find ways to pay in shares that will allow tax-free allocations of bonuses to the bankers.
I am definitely not a defender of the excesses of the City, but since the British Government makes billions in revenues from the activities of the City, this action is akin to killing its own "golden goose."
It is at the corporate level that a "special tax" might make sense. After all, they are operating under a Government-protected environment and historically low interest rates. The current plan is just a way to attack the individuals for a system that is propagated by the financial institutions. While these individual attacks may sell very well, it is not appropriate for government leaders to take revenge for their own ineptitude.
Gordon Brown, himself a successful Minister of Finance under Tony Blair, should have been the perfect Prime Minister for Britain under this financial crisis. However, he has time and time again proved his incompetence or tried to adopt a leftist ideology. Whatever the reason, he is killing the City of London...and Wall Street, who lost the leadership recently, will definitely be able to pick the pieces of that suicidal policy and the net losers will be London, Britain and European capital markets.
During the Northern Rock crisis, he was negotiating a deal in China with none other than Richard Branson, the Virgin flamboyant chairman in the back of London negotiations that would have avoided the nationalization of Northern Rock.
It is the British Government that bears the co-responsibility with the US investment bank Lehman Brothers for the collapse of Lehman Brothers by opposing the deal that Barclays Bank had agreed with Lehman for the takeover of the entire bank. They ended up buying the US operation after a bankruptcy that has exposed the incredible mess created in the United Kingdom by that same bankruptcy that will take more years to be resolved.
President Sarkozy did not need to try to undermine the City. The British Government is doing the job all on their own.