Margareta Pagano: Let them eat scallops - the Tories find they're guests of honour in the City

Square Mile warms to Conservatives as Darling courts cold shoulder
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The Independent Online

Can scallops do for the Conservatives what prawn cocktails did for Labour in the mid 1990s? That's what the Tories are praying for as they hold in their waistlines to cope with the rising number of City lunches and dinners they are now being invited to. And scallops are the most popular starter, says Mark Hoban, shadow Financial Secretary to the Treasury: "I'm getting fed up – scallops are everywhere I go on the menu."

Over lunch last week – salmon carpaccio – Hoban says there's no doubt the temperature towards the Tories is changing. It's not quite a love-in yet but he and shadow Chancellor George Osborne are increasingly sought out to come and discuss policy in a way that wasn't so only a few months ago. While many used to find Osborne a rather arrogant figure, City hosts are beginning to warm to him as he gets to grips with his brief.

All this wining and dining is helping the Tories raise funds: there is nearly £10m in the fighting fund and City Circle clubs are doing well in raising small amounts from individuals, which they like because it reduces the reliance on big donors – and therefore potential scandal. You could say it's the most fertile ground for the Tories in more than a decade. The mood music makes it feel like the mid-1990s when the late Mo Mowlam, then Labour's City spokeswoman, had to consume huge quantities of prawn cocktails as she courted the City in her inimitable and successful way.

But Chancellor Alistair Darling seems to be making sure this relationship is under serious threat, if not being severed. He has managed to enrage or frustrate huge numbers of the business community with his uniform rate on capital gains tax for venture capital and private eq-uity industrialists (quite rightly on the latter, in my opinion). Then there is his handling of Northern Rock; the ridiculous tax changes so that family companies can no longer pay dividends or wages to husbands or wives with the lower tax threshold; and muddled, complex rules on non-domiciliaries.

What business wants when Darling stands up on Wednesday to deliver his Budget – if he wants to win back trust – is simplicity, and nothing new. He has tried to sell himself as the Chancellor of simplicity, but he seems incapable of bearing this out. All his recent changes will have added 10,000 words to the tax code – making it the longest in the world after India.

Indeed, Darling is likely to create more complexity. He is unlikely to give into the City campaign to delay the non-dom plans for a year. But he may well lift the de minimis £1,000 amount which is liable to tax and would be a way of lifting the lower-paid non-doms out of the bracket, as it's the regressive nature of this tax which has caused such a stir.

Elsewhere, most people seem to accept that the £30,000 levy is but a fleabite for Britain's richest non-doms. No one expects him to shift much on proposals to the insurance bond market as a result of the CGT changes announced last autumn. But this is a move that has prompted a furious response from the Association of British Insurers, which argues that jobs, revenue and savings will be lost. This is hardly a smart move for a Chancellor who presides over a savings ratio of 2.5 per cent, the lowest for decades.

But a windfall tax on energy companies is what business fears most. For Darling it's the opportunity to score a political point as electricity and gas prices have become so political, with a record number of people facing fuel poverty. But a windfall tax at such a sensitive time, with the world facing even higher oil prices and threats to future gas supplies – wait for when Russia starts supplying China with gas and see what happens to world prices – would not just be foolish but short-term. One of the problems facing energy companies is that they have not invested enough in their own plant, and certainly not in future technologies. Taxing them would be a backward step – and give the Tories the chance to eat more scallops.

Self-denying bankers

One of the most riveting stories to emerge from the US last week was the news that investment bankers are looking at plans for a voluntary pay code. Apparently, the Institute of International Finance is utterly serious: it wants bankers to bring in a code of best practice to discourage excessive pay – possibly by deferring bo-nuses and other incentives until the result of their antics becomes clear. So who will set the guidelines? Why, the bankers, of course. My fear is that they will find other means of reward – just like company execs filling their boots with share options instead of taking higher pay. Look back to the last crash – investment bankers were saying exactly the same things as they are now.

And then see what happened: after a few years of hair shirts, the industry's top men gaily padded their pockets again. Last week we saw the result: Stan O'Neal (who made $161m) sacked as boss of Merrill Lynch, and Chuck Prince, the former boss of Citigroup ($40m), appeared before Congress to explain their outrageous greed.

Only shame will change how these bankers pay themselves so much. If the IIF can achieve this, bankers may actually find they have a better-run industry. Sadly, I am tempted to say that pigs will fly before this happens.