Expert View: Tories shoot their own in war for the Square Mile vote

"Not a word, not one bloody word ..." The finger jabbed meaningfully in my face. Having dismissed their ambassador to the City, Howard Flight, the sensitivities of Michael Howard's election team are at a high.

"Not a word, not one bloody word ..." The finger jabbed meaningfully in my face. Having dismissed their ambassador to the City, Howard Flight, the sensitivities of Michael Howard's election team are at a high.

Of course, once upon a time it would have seemed ridiculous that the Tory party needed a special man in the Square Mile; why send an ambassador to home territory? But we've come a long way since then, and, in this election, what the bankers think has come to matter very much.

Prior to Tony Blair's election in 1997, it was taken for granted that a Labour government was "bad for business" - as testified by the disastrous dismantling of the UK economy during its 1970s tenure. Reading the James Callaghan obituaries last weekend, it was frightening to be reminded just how far Britain had sunk under the weight of nationalised industries, high spending and punitive taxation.

But as the first Blair/Brown stewardship of the UK economy proved not only safe but successful, the Tories "ownership right" to financial issues was questioned. I think, in particular, that the granting of independence to the Bank of England was a masterly stroke which won over many sceptics.

The recent, highly charged, release of the "Black Wednesday" papers (detailing the Tories' mismanagement around sterling's ejection from the European Exchange Rate Mechanism in 1992) was a clever ploy on the part of the Government to rub this advantage home.

Insiders tell me that Howard Flight's appointment was perceived as crucial in this war of perceptions; the party which can command the City is seen by the electorate more broadly as the party which can run the economy. Flight had to make the economy Tory territory once more .

He had a lot to work with, arguing that the Blair Government had clearly not been good for the pensions and investment industries - indeed that these two pillars of UK services industry strength had virtually been chopped away. It is easy to show that incentives for savers have been gradually removed.

Whatever his shortcomings as an after-dinner speaker, Flight's City strategy enjoyed success. The last Conservative City Circle party jammed in nearly 600 supporters, more than twice the previous year. Equally, some of the City's finest have dipped hand in pocket. Not just stars like Brian Winterflood (£10,000) but institutions - such as Fidelity (£50,000 a quarter) - are swelling the Tory war chest.

In speeches and articles wooing the financial sector, Flight had homed in on a single issue - excessive regulation - and he was on to something. Business and Finance have simply had enough.

Last year, they had to implement the Higgs committee's recommendations on non-executive directors, and Sir Robert Smith's on audit committees. This year they face the challenge of new international accounting standards and the rigours of the Sarbanes-Oxley Act - you even have to document who has authority to open the till in your staff canteen.

No wonder, in a recent survey of 440 bankers, that excessive regulation was voted as the biggest threat to the industry. The Tories are keen to heap the blame for this red-tape nightmare at the Government's door. But the majority of this regulation has nothing whatsoever to do with the Government.

Labour is note alone in being spurned. The party that definitely comes bottom in any City poll right now is the Liberal Democrats. Its pledge to raise higher rates of taxation makes it the party bankers love to hate. As one noted to me, if Charles Kennedy ever has the chance to do this, he might find his tax demand stamped "no longer relevant" ... and returned from a New York address.

christopher.walker@tiscali.co.uk