Chancellor of the Exchequer Alistair Darling, targeting what he calls “greed and recklessness” in Britain’s financial system, asked banks to curtail bonus pay and said the rich will pay more in tax.
“It is right that those who earn the most should shoulder the biggest burden,” the finance minister told the ruling Labour Party’s annual conference today in Brighton, England. “We will introduce legislation to end the reckless culture that puts short-term profits over long term success. It will mean an end to automatic bank bonuses year after year.”
Darling said he has raised tax rates and eliminated relief for pension contributions for the rich. The Treasury is probing 100,000 offshore bank accounts and expects to recover at least £1 billion ($1.59 billion) from Liechtenstein alone.
Prime Minister Gordon Brown’s government is attempting to shore up support among voters by attacking bankers and suggesting the rich will have to foot the bill for the sharpest recession since World War II.
“This is a government on the cusp of losing the next election, and if banker-bashing is going to be popular they’ll do it,” said Simon Maughan, a banking analyst at MF Global Securities in London. “This is a classic case of knee-jerk political reaction to a crisis.”
With the next election due by June, Labour’s support is tied with the Liberal Democrats, the third-biggest party, 15 points behind the Conservative opposition, a ComRes Ltd. poll today shows. Brown yesterday rejected suggestions that he will step down before the vote and that he had health problems.
“This is the last chance for the Labour Party to go into an election with a new leader,” said Ivor Gaber, professor of political campaigning at City University. “If Brown is seen to have a good conference, Labour members of Parliament may shrug their shoulders and let him continue. If he has a bad conference there is still time to elect a new leader.”
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Darling’s speech also was aimed at reassuring bond investors that the Treasury is serious about curbing the deficit and voters that the cuts that come will protect health and education services. He aimed to draw distinctions with the Conservative opposition, which he said would slash spending indiscriminately.
“Every step to limit the severity of this recession and the damage to families they opposed,” Darling said. “At every stage, the Tories have misunderstood the causes of the crisis, underestimated its severity and opposed the measures to limit its impact.”
Conservatives questioned whether the government, which spent the first half of the year insisting that no spending cuts were needed, is serious about reining in the deficit.
“The idea that Gordon Brown can reinvent himself as the guardian of the nation’s finances after doubling the national debt and spending the whole year opposing anyone who said that borrowing was getting out of control is the latest attempt to treat the public like fools,” said George Osborne, the Conservative lawmaker who speaks on finance.
The Treasury expects the deficit to surpass 12 per cent of gross domestic product, the most in the G-20. That forecast prompted Standard & Poor’s to threaten a downgrade for Britain’s AAA credit rating.
“The public understand that difficult decisions will need to be made,” Darling said. “Tighter spending doesn’t mean a return to the Tory dark ages. It does mean a determination to cut waste, cut costs and cut lower priority budgets.”
This week, Darling will speak to Richard Broadbent, chairman of Barclays Plc’s remuneration committee, along with Colin Buchan of Royal Bank of Scotland Group Plc, Mark Moody-Stuart of HSBC Holdings Plc and Wolfgang Berndt of Lloyds Banking Group Plc. His proposals are based on an agreement among leaders of the Group of 20 nations last week.
Brown yesterday told the BBC the proposed Business and Financial Services Bill will “ban the old bonus systems.” He also pledged a Fiscal Responsibility Bill that would require future governments to cut the deficit. The Financial Services Authority today said it would begin looking at how to implement the guidelines drawn up by the G-20.
Business Secretary Peter Mandelson told BBC radio that regulation of banks should have been “more intrusive” and that the UK depends too much on financial services and should stimulate other parts of the economy.
Brown also is seeking to reassure Labour supporters that he’s the right person to lead the party into the next election, which must be called by June 2010. The ComRes survey in the Independent newspaper found voters said they preferred every one of the possible alternative Labour leaders to Brown.
“Unless things change by Christmas it’s almost a given there will be a challenge,” Alan Simpson, a Labour member of Parliament, told BBC radio.
The ComRes survey of 1,003 adults showed Labour and the Liberal Democrats both with the support of 23 per cent of voters compared with 38 per cent for the Conservatives. No error margin was given. At the 2005 election, Labour won six times as many parliamentary seats as the Liberal Democrats.
Long-time allies that could turn into challengers to Brown yesterday remained loyal to the prime minister. Energy and Climate Change Secretary Ed Miliband said Labour “can triumph over adversity.” Education Secretary Ed Balls called for the party to unify and fight for its values against the Conservatives.
“We want more fighters not quitters,” Balls told BBC radio yesterday. “We can win this election. If we believe in ourselves and have a go, we can go out and win this election.”