Nick Anstee: Lord Mayor shows he's up for the fight
Repairing the City's battered reputation after the banking crisis is vital to the UK economy, the Lord Mayor of London tells Sarah Arnott
Thursday 14 October 2010
"The banks have to demonstrate that they make a social contribution," the Lord Mayor of London says, with something like exasperation. "What the financial industry does, and why it matters, needs to be explained to the public."
Notwithstanding his vast office in the Mansion House – with its glorious, 18th century moulded ceiling and views over the Bank of England – Nick Anstee's is a difficult job.
Even in good times the year-long, unpaid appointment is gruelling: on a recent nine-day trip to China, the Lord Mayor's 55 engagements took in six different cities and included one major conference speech and talks with five regulators and two sovereign wealth funds.
But in the aftermath of a financial crisis, Mr Anstee must not just wave the flag for the City overseas, he must also lead efforts to rehabilitate its all-but-annihilated reputation at home. To discuss bankers, bonuses and the state of the public finances with the Lord Mayor is to step into a looking-glass world. No longer the greedy, reckless architects of crisis and recession, Mr Anstee's banks are the much-maligned powerhouse of the British economy, a super-top-rate taxpayer that should be rehabilitated from its scapegoat status and valued as the economic treasure that it is.
These are not the views of an industry cipher, the Lord Mayor stresses. They are an economic reality. "I sit on both sides of the fence," he says. "I speak to the City as well, as for the City." The 52-year old accountant does not shy away from the scale of the challenge. "It's not going to happen tomorrow, and not even in a year – this is a long-term project," he admits. "We have to be realistic given the anger that there is."
While the banks themselves must work on their communication skills, politicians and the media also need to help the country move on. "Politics is getting in the way of restoring the reputation of the financial services industry," Mr Anstee says. "Senior ministers at the Treasury acknowledge that they are playing to public sentiment, but the mantra is still to mirror the public anger."
The stakes are high indeed. Financial services represent 8 per cent of our economy but produce more than a fifth of total tax revenues. A whopping £61bn poured from the City into the Exchequer last year, equivalent to more than half the health budget and one-and-a-half times the interest on our national debt. "We are lucky enough to have a financial centre that is the envy of the world, why would we want to damage it?" Mr Anstee asks with genuine bafflement.
But public discourse shows few signs of such appreciation. And there is worse to come. There have been opening skirmishes already, after Goldman Sachs's recent admission that it is handing out slugs of free shares to keep top staff, and a Morgan McKinley report this week revealed 48 per cent of City professionals are expecting a bigger bonus this year. Against the backdrop of the Government's Spending Review – set to take an axe to public services and cost thousands of jobs – the spectacle of bankers raking in gargantuan bonuses could not be more toxic.
There is more for the banks to do to get their houses in order, and they are aware of it, Mr Anstee says. But there has already been significant progress that is often overlooked. British banks led the world in increasing capitalisation levels, and in shifting away from guaranteed bonuses and massive cash awards. They are also making genuine efforts to help foster recovery, such as last week's £1bn venture capital fund to help cash-strapped smaller businesses.
More important still, from the Lord Mayor's perspective, is the recognition the six big banks are only a small part of the City. The culture of corporate social responsibility across the Square Mile – the £42m donated annually by the 108 livery companies, for example, or the community programmes to be recognised at the Dragon Awards at the Mansion House next week – is being drowned out by shrieking headlines about iniquitous bonuses. But it is the City as a whole that is under threat.
"The industry has got to do a better job of communicating," Mr Anstee
says. "But when we try to talk about positive things everything just goes back to emotive issue of bonuses."
Even those eye-watering payouts are not all they seem, according to Mr Anstee. "Put simply, bonuses are good for the economy," he says. "But people just don't want to hear that argument." It is not that bonuses are inherent to a cyclical industry that needs to keep down its fixed costs to avoid mass redundancies in the downswings. There are also the tax implications to consider. Adding together the top-rate tax band, employer and employee national insurance contributions, and VAT raked in when the money is spent, as much as 70 per cent of bonus payments are scooped up by the state.
He is also dismayed by the tone of political discourse. "Politicians acknowledge that the arguments about the value of the industry are correct, even to the point of recognising the role of bonuses, but the political environment is getting in the way," Mr Anstee says. "Vince [Cable, the Business Secretary] understands the situation, but he is a politician."
The banks are resigned to another levy from the Chancellor. But then the blood-letting must stop, he says. The Government must re-create the old City climate of "predictability, clarity and stability" of policy, or individuals and institutions will simply go elsewhere. "We can't just look at the domestic level: this is a global industry and London does not have an absolute right to any of it," Mr Anstee says. The politics of envy ultimately needs to give way to the reality of economics.
The path to Civic duty
* As Lord Mayor of London Nick Anstee is the 682nd incumbent in a role established in the reign of Henry II in 1189
* Since qualifying as an accountant in 1982, Mr Anstee's career has included stints at Arthur Andersen, Deloitte and, since 2007, SJ Berwin
* In a parallel civic career, he has worked as a councilman and then alderman for Aldersgate Ward and as the Sheriff of the City of London
* He is also on the boards of the City of London School for Girls and Sir John Cass Foundation Primary School
* Mr Anstee is married with three children
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