Banking: UK Gov plays Little Englander card and ends up looking stupid

Gordon Brown is a man in a hurry. He's trying to secure his legacy and to do it, there are no sacred cows. Having increased taxes to an extraordinary amount before the financial crisis, to pay for more and more monuments and re-formatting of Great Britain, he then increased taxes still more, and put the country into serious deficit for years to come to bail out the financial sector, having left all other sectors to die. In the past week, a ridiculous number of commissions, inquiries and consultations (which have suddenly become branded "calls for evidence") have been announced, each requiring yet more taxpayer money. Yet the only realistic reason for these is to try to gather positive news ahead of the next election: if he wants to make a real inquiry, then the use of taxpayer's money to produce Labour election material must be a good candidate.

Gordon Brown, readers will remember, is the Prime Minister who claimed to be the man who saved the world. He didn't. And it's still not safe.

He has been one of the main forces in looking for a Plan B for the recession. He wants someone to blame and he doesn't want it to be governments or their agencies.

And so, he's blaming the banks. He, and his equivalents, are pushing forward with regulation, much of which appears to be designed to distract everyone from asking what the government was up to.

The latest is to claim that UK banks will be compelled to meet bonus criteria set by the G20. Brown is one of those who pretends that the G20 is some sort of autonomous body that has power to make its members do things. It's nothing of the sort: it's a self-appointed committee what serves its own members' interests. When Brown says "The G20 says..." he means "I and those I could persuade say..."

And so yesterday, we received multiple versions of a UK Treasury media release informing us that eleven foreign banks operating in the UK had agreed to "support the implementation of reforms to bank pay agreed at the G20 in Pittburgh."

The banks concerned are Bank of America, Merrill Lynch, Citigroup, Credit Suisse, Goldman Sachs International, JP Morgan Securities Ltd, Morgan Stanley, Nomura and UBS have, the Treasury says "confirmed their commitment to the FSA Rule and supporting Code on remuneration practices, which was published in August and comes into force on 1 January 2010, and their full support for the G20 agreement, which sets global standards for the implementation of the Financial Stability Board’s remuneration principles."

Hm... The Financial Stability Board. This was originally created as the Financial Stability Forum, and its primary activity appeared to be to re-publish OECD materials on tax harmonisation, blaming small economies for their de-stabilising effects. But it ran out of steam. Its boss went to the Bank of International Settlements. Like all QANGOs, it was never wound up. So the G20 in April decided to rename it - and to formally annex it to The Bank of International Settlements.

So it can hardly be regarded as independent, despite the illusion the UK Treasury seeks to create.

The Treasury went on "EU banks with major London branches, BNP Paribas, Deutsche Bank and Société Générale confirmed that they will implement the G20 agreement in accordance with their home regulator and would seek to voluntarily comply with the FSA Rule on Remuneration for their UK based employees."

And the Treasury even had a little quote from the banks' own statement: "The financial services industry must take a responsible and long-term approach to remuneration if it is to retain its competitiveness and regain public trust. I am pleased that the most significant banking institutions operating in the UK have moved quickly and are supporting our implementation of the agreement reached on bank remuneration at the G20, and this reinforces the standard we have set for other financial institutions and countries to follow. I will be writing to the chairs of their parent companies’ Remuneration Committees to share with them the outcome of this meeting."

But, hang on. We know several things from the causes of this global crisis - one of which is that we live in an interconnected world where globalisation is no longer a fashionable topic because it's already a done deal.

Why would anyone live in London, with Brown's penal rates of tax which successor governments will be poisoned with and unable to unravel with any haste or decorum, and find their bonuses capped when they could just as easily work from, well, somewhere with a now or low tax rate where bonuses are not capped?

And the USA has not, so far, made any commitment to force capping on its local market.

So, currently, Chicago's looking good, and so is Toronto, half the Caribbean and chunks of Asia Pacific.

And, after all, as HSBC recently telegraphed, primary operations in the GMT time zone are not the best placed to benefit from the impending (perhaps) recovery.

Yes, Mr Brown - your PR says one thing, but reality says another.

For sure, we do not expect the US reporting season to result in small bonuses. And that period starts now.