Margareta Pagano: City has its own good reasons for backing 'Red' Ed
Sunday 03 October 2010
If City bankers had been voting for the Labour leadership, Ed Miliband would have beaten his brother with a proper grown-up majority rather than the tiny 1.3 percentage points he managed.
In a poll carried out by Financial News, it was "Red" Ed who scored a resounding victory with 74 per cent of the vote, while David received just 13 per cent. What, you cry, how could greedy bankers be on the same side as the trade unions? For bankers to vote for Miliband Minor is like turkeys voting for Christmas, as he has promised to keep the 50p income-tax rate, and to add yet another bonus tax, a new bank levy and a Tobin-style tax on all transactions, if he were in power.
Only two explanations for the poll result are possible; either the City's bankers are more left-wing than they like to let on – and don't mind paying more in taxes as they earn so much that the extra tax becomes marginal – or they voted tactically because they know having Ed in charge of the Labour Party will ensure the coalition stays in power for another 10 years, at least.
Being cynical, I'll go for the latter view. But is it true that Ed is as dangerously Red as has been made out? It's still too early to tell, as he's yet to say much on how the structural deficit should be dealt with other than just raising taxes, which is plain silly. While he's been smart, acknowledging that some cuts are necessary and some will be supported by the party, he needs to stop being a deficit denier. It's not enough to claim that Labour needs to regain fiscal credibility, or that it doesn't do "boom and bust" any more – that's exactly Gordon Brown promised more than 13 years ago – and is frankly insulting to the public. Rather, Miliband should find the courage to say what he did on Iraq, to admit that the previous leadership got it so wrong, and why.
On broader business issues, Ed has given more flesh; a higher living wage, which despite a few squeaks from the business community, is not really going to upset anybody too much, and a new High Pay Commission to look at pay differentials which is not dissimilar to the coalition's own pay review. His suggestion that union – and staff – representatives should sit on company boards is hardly reds-under-the-beds stuff, and would attract more support than many people might think.
We'll get a better feel for Ed's true colours over the next few days, when the Shadow Cabinet is in place; Yvette Cooper, Douglas Alexander, Ed Balls and Liam Byrne are still the favourites, all in the running for the two big jobs as shadow chancellor or business secretary. Byrne leads the race for business; he's smart, so would be good to pitch against the clever Vince Cable. Expect to hear more of new MP Rachel Reeves, a former Bank of England economist who wrote the most recent Why Vote Labour? book, and who is likely to be somewhere on the team.
If Ed wants to show he's more rainbow than red, and prove the City is wrong about his party being an irrelevance for at least a decade, he should find a role for Alistair Darling, the only one of the old guard who retains a shred of credibility. Although Darling hasn't put his name forward, Ed would be wise to keep the former chancellor close if he wants to mount a serious opposition party.
But I suspect the most ferocious opposition is still going to be from his back-benches where his brother's supporters will be waiting to stick the knife in; fratricide is even more dangerous than tribal war.
Exit strategy: Rose leaves rolls in perfect working order
It's not often you can describe a businessmen as a true Titan, but Sir John Rose is one of those exceptions. He's turned Rolls-Royce into one of the world's greatest manufacturers by building a team of brilliant engineers and technical staff, and by sticking to the long-term view despite the hurly-burly stock market. Not only does he leave the group in better shape, but the manner of his leaving is exquisite, putting other firms to shame in how they manage succession planning. Sir John says he's not sure what he wants to do when he leaves, in March: but I have the perfect job for him. David Cameron should ask him to head up a new industrial-policy unit to advise government, business and schools,and show us how to fit a Rolls-Royce engine into our rickety old UK economy.
Ministers need to act quickly to stop others following Wolseley overseas
It's not just the builder's merchants at Wolseley joining the hedge-fund traders fleeing to Switzerland to reduce their tax bill but a growing number of non-doms who are fed up with paying the £30,000 fee introduced by the last government. According to new figures from HM Revenue and Customs, 278,000 taxpayers left the UK in the two years between 2007 and 2009. It's difficult to be too precise about why so many people have left in such a short time but there's no doubt that the new non-dom rules, plus the threat of the 50p tax and rise in capital gains tax have all contributed to the overall mood which is that resident foreigners are not particularly welcome here. There's also a new flood of British emigrating – in 2008 more than 23,000 people exchanged the UK's grey skies for Australia – the highest level since the 1960s. Much of this movement is due to the recession; the more enterprising will look for work overseas if they can't find it here.
While there's been a lot of hype over Wolseley's move to the Alps, it's a serious problem for the Government. Wolseley reckons it can save £23 m by switching domicile – that's a lot of jobs and new investment; at the moment Wolseley claims its being taxed twice here; there's corporation tax but also under the Controlled Foreign Companies rules which means it has to pay tax again on all revenue earned overseas. The coalition has admitted this is a bad, complex tax and has promised to make changes – but not for another two years. It's also admitted it is reviewing the non-dom rules which most people agree have turned out to be a complete nightmare.
But promises are not good enough; ministers should be putting these changes at the top of the agenda; once a reputation for being an attractive place to do business is lost, it is hard to win back.
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