Time for the City grandees to wake up

It was brave of Lord Turner to take his controversial take on the future of finance directly to an audience of black-tied bankers at the Mansion House.

He was heckled, and the mood music in the City, and apparently at the dinner too, seems to resemble the attitude of a teenager who has been banned from using their facebook account.

Bankers are concerned that politicians are whipping up the public into an anti-banker frenzy. Many are “appalled, disgusted and ashamed” with Lord Turner’s suggestion that some of their activity is “socially useless”, saying that such talk is contributing to a dangerous backlash.

Well, last night Lord Turner went beyond that, pointing to the Financial Stability Board’s G20 plans, in which he has a key role.

“It is essential that the priority use of high profits should be to rebuild the capital needed to support lending, allow official measures to be removed, prepare institutions to meet higher capital requirements, and that bonus and dividend policies should be consistent with this priority.

“And over the long term there will be a legitimate interest of regulators in aggregate bonus payment rates…”

Now, this is not a return to incomes policies, but it is a hugely significant warning shot.

If any banker believes that there is any political capital or votes to be won in blandly stating how important the City is to UK plc, then I can only put it down to altitude sickness developed atop their Canary Wharf skyscrapers. That argument simply won’t wash any more.

If, in January, the City fills its bonus pots too much, at precisely the same time that public sector workers are facing job losses and paycuts, then just watch the election become dominated by a Dutch auction by the major political parties about a crackdown on the bankers.

Expect stories about the major international banks who have offset all their future losses in London such they are paying no taxes in the UK. Don’t expect the Tories to come to the rescue either. The Conservatives have in many ways been outdoing the Government rhetoric particularly on pay levels in those parts of the City that have directly or indirectly been supported by the taxpayer.

And that is the key difference. Bankers are currently more greatly state-supported than single mothers. And there is also an army of fed-up former bankers, who know finance inside out, who are blowing the whistle on the idea, the emperor’s new clothes notion, that the City needs to be ‘protected’.

Canada, which has not spent a penny of public money on bailing out its banks, shows that prudent, sober regulation of financial services has nothing to do with left wing or right wing politics.

If I was a bank chief today I would be finding ways to reduce my bank’s bonus pot in January, and also finding some pretty tangible ways to display my “social use” to the nation, beyond spurious claims on carbon neutrality.

Starting with the G20 this weekend, and finishing with the election in May, there is a chance that Britain’s relationship with the City may be altered forever. Few in the City, bar Stephen Green at HSBC, seem to have clocked this.