The banks who cry wolf: or how bees can only sting once
A Financial Times editorial today urges the Government to call the banks’ bluff over threats to move overseas if this, that or the other policy that they don’t like is introduced. The FT correctly says that:
Such threats should be faced down, not just because they are unreasonable but because they are of questionable credibility. It is not clear what “moving abroad” actually means. Were a bank such as Barclays to shift its headquarters, the impact on the UK would surely be minimal as it would still do much of its business and pay taxes in the country. What is more likely anyway is that rather than upping sticks altogether, some banks may reduce their new investments in Britain. This might make the City slightly less of a hot spot, but it would not be a disaster. And were it to be the price of financial stability, this would be a price worth paying.
This is also rapidly turning into the longest blackmail attempt in history. Every time any – however minor – proposal is made to tax or restrain financial sector profligacy or risk-taking (remember the dire warnings about Alistair Darling’s bonus tax?), some major financial institution or other lets it be known that – often with crocodile tears or an onion in their hankie – that they might have to consider decamping en masse to somewhere with worse opera houses and an inadequate luxury goods market, or worse, no honours system! The FT mentions Standard Chartered and HSBC too – I wonder if RBS, despite being actually owned by the Government, has made similar threats?
The threat can be made perpetually. But it can only be carried out once, and that’s another reason why it is not a threat that should be taken seriously. It is the equivalent of saying “do what I say or I warn you, I will give away my only weapon.”