The head of Britain’s top banking watchdog supports the idea of new global taxes on financial transactions, warning that a “swollen” financial sector paying excessive salaries has grown too big for society.
Adair Turner, chairman of the Financial Services Authority, says the debate on bankers’ bonuses has become a “populist diversion” and that more drastic measures may be needed to cut the financial sector down to size.
He also says the FSA should “be very, very wary of seeing the competitiveness of London as a major aim”, claiming the city’s financial sector has become a destabilising factor in the British economy.
It is actually quite astonishing that an establishment figure, so close to the current very banker friendly Labour government, should even be questioning the future of the City culture in such an outspoken manner. One can only wonder at this stage how Gordon Brown and Peter Mandelson, who have never met a banker that they didn't immediately want to honor with a knighthood at least, might be reacting to the comments from someone who carries a lot of credibility in the UK.
As the FT suggests the remarks by Turner have a candid quality which could even gain some traction with other members of the global financial establishment and suggest that it may not just be Nicolas Sarkozy who is serious about taking on the almighty banking constituency.
Lord Turner’s suggestion that a “Tobin tax” – named after the economist James Tobin – should be considered for financial transactions is also likely to reverberate around the world. The proposed tax, which has previously been championed by development economists and the French government as a means of funding the developing world, has been fiercely opposed by the finance industry.
The FSA chairman also claims that parts of the financial services sector had grown “beyond a socially reasonable size”, including derivatives and hedging and aspects of the asset management industry and equity trading.
Predictably the reaction from the British Bankers Association was not in favor of Turner's suggestions and is stressing that financial services are a vital pillar of the UK economy which "could be undermined by the wrong kind of taxes or regulation."