LONDON (Reuters) - Britain’s Labour Party will help the financial services industry prosper as a global exporter but will ensure vigilant scrutiny by regulators if Ed Miliband wins the May 7 national election, the opposition party’s finance minister-in-waiting said on Wednesday.
In an attempt to allay financiers’ concerns that a possible Miliband government would damage London’s position as the only financial capital to rival New York, Ed Balls said he wanted to see the financial services sector expand.
“If you take a 30-year view, we have a huge opportunity to sell pensions and life insurance and our wider financial services expertise to huge emerging markets like China and India and other countries around the world,” Balls told Reuters .
“This is part of our economy that we should be seeking to expand and grow in the coming decades and not shrink,” Balls said in an interview. “There is a phrase in the English language: Don’t cut off your nose to spite your face.”
London trades more than 40 percent of the $5-trillion a day global foreign exchange market and is by far the most important financial centre in the European Union, trading twice as many dollars as the United States and more than twice as many euros as the entire euro zone.
The popular press has cast bankers as the villains behind the 2008 financial crisis and a string of scandals involving leading banks active in London has added to calls to clamp down on financial wrongdoers.
At the same time, the sector makes up about a tenth of Britain’s gross domestic product, contributes over 11 percent of tax receipts and employs over 1 million people.
“Where things have gone wrong there has got to be tough action, and where there is excess it has got to be scaled back, but our financial and professional services should be a growth industry for Britain for the years and decades to come,” Balls said.
Labour leader Miliband, who has been dubbed “Red Ed” by some of the domestic media because he has pulled his party leftwards, has alarmed some business executives with his talk of asset strippers, tax dodgers and predators.
Miliband has ruled out the referendum on European Union membership that Conservative Prime Minister David Cameron has promised, a Labour policy that is welcome to many business and banking leaders. But many investors fear Miliband has little understanding of finance.
The job of allaying those fears has fallen to Balls, a 48-year-old Oxford- and Harvard-educated economist who was once the most senior Treasury adviser to former Labour finance minister Gordon Brown.
“Things went wrong in the global financial crisis and people across the country have borne the brunt of that in the taxes they paid and the turmoil in people’s lives. So people want to know that things are going to be different in the future,” Balls said.
“That is why it is right that we have tough regulation of financial services in the future, tougher than we had 15 years ago,” he said, adding that the Serious Fraud Office should have sufficient funding and powers to investigate wrongdoers.
Balls said bankers were paid well and so should pay a 50-percent top rate of income tax while Britain is seeking to reduce its deficit.
Labour said last month it would extend to at least 10 years the length of time over which miscreant bankers could have their bonuses clawed back if it wins the election.
The Bank of England last year announced bankers could have their bonuses clawed back for up to seven years from the date they were fully paid out, part of a regulatory clamp-down on wrongdoing in the financial sector.
When asked whether other parts of the financial services sector should face the same rules, Balls said the banking sector should make a contribution.
“In some parts of particularly banking there is a sense that banks weren’t really thinking first and foremost about their customers, whether that is individuals or businesses.”
“In the kind of open competitive banking industry I would like to see in the future, those banks which think they can take their customers for granted are those that will end up declining and going to the wall,” Balls said.
Writing by Guy Faulconbridge; Editing by Giles Elgood