The recent elections to the City of London’s local authority were fiercely fought, after years where the majority of seats went uncontested. Lessons should be drawn for any future attempt to reform the financial services industry.
Elections for the City of London Corporation’s Common Council were for many years politics-free events in which a narrowly drawn electorate voted for a narrow range of candidates. As often as not, sitting councillors stood for re-election in seats that were uncontested. Debate about the sort of organisation the Corporation should be did not take place.
The election on the 23rd March of this year was different. It involved public debates about the Corporation’s future and a genuine choice of candidates in 21 of the City’s 25 wards. The City Reform Group, of which I am a member, encouraged and supported independent, reform-minded candidates to stand and 10 did so. (See my last article for OurKingdom, in the run-up to the elections.) Those candidates presented programmes of reform that were couched in distinctly City-friendly tones, calling for transparency in the manner in which the Corporation spends its money and makes its decisions, advanced new proposals for how it could better deploy its considerable resources (for example, by ploughing money into the City’s police force in order that it may become a serious player in the fight against financial crime) and how it may act as leader in building a culture of professionalism in the financial services industry.
Unusually, since Corporation elections are generally non-party political, the Labour Party also fielded 10 candidates. The Labour manifesto involved similar commitments to reform as those candidates who were supported by the City Reform Group. However, the Labour party pledged a wider range of commitments, including making the Corporation a living wage employer and using its clout to persuade City employers to do likewise. Labour candidates stood in wards in which independent reform-committed candidates did not stand in order to ensure that in as many wards as possible the voters had a candidate who stood for reform of the Corporation.
The voters, having been given a genuine choice they came down emphatically, in favour of the status quo. Only two independent reform candidates were elected. None of Labour’s candidates were, although several performed well and one came within a handful of votes of doing so. The winner of the election was indisputably the Corporation itself. (See the results here.)
One must approach with particular caution the results of an election in which the votes even for successful candidates were in the hundreds and not the thousands. However, it provides a glimpse of the attitudes and approaches that will feature in politics of the financial services industry in the coming years.
The City voters
The Corporation’s electorate is unrepresentative of London and the UK population, but is peculiarly representative of the City itself. It consists of those with property interests within the City and those who have been allocated a vote by corporations who are provided with a number of votes to distribute internally. This franchise means that whilst some of the electorate were small business owners and some were residents, the majority were those who worked within the financial services industry.
The votes for Labour party and independent reform candidates show that the industry does not vote as a monolithic block. But the rejection of reform candidates in the vast majority of seats is significant.
Those who stood for reform offered the mildest recipe for change. They advanced no critique of capitalism, or even of the version of capitalism which successive governments have advanced over the last 30 years. They did not seek to challenge the assumption that here was an industry that should be prized and supported or that the Corporation was the body to provide industry-wide leadership. What they did stand for was an acknowledgment that something had gone very significantly wrong with the way in which many parts of the financial services industry operated and that the Corporation, which is effectively the bridgehead between the financial services industry and the state (the term ‘lobbyist’ does not quite capture the entrenched nature of its influence), was part of the problem.
The election was therefore an opportunity for the City to demonstrate a willingness to acknowledge wrong and commit itself to reform by voting for change within its own representative body.
The City’s commitment to reforming itself has been much trumpeted by the Corporation and other industry leaders to ward off the threat of external regulation (most recently in its submission to the Parliamentary Commission on Banking Standards in which it opposed any additional regulation of the banking industry). If one thing emerges from this election it is that for all those claims, when the City is faced with the test of voting for reform, then in the privacy of the voting booth, the City chose the status quo. When one comes to consider how far the City can be trusted to puts its house in order, this fact deserves to be better known.
Although the launch of the City Reform Group was respectfully reported by the broadsheets the election itself was (aside from the coverage by the Financial Times) covered poorly even by the Evening Standard, London’s daily paper.
This may say something about the commitment of that paper to provide serious coverage of important London events and perhaps also about its own pro-City bias. However, even the most right wing news outlet finds it difficult to ignore the news on its doorstep. Perhaps the greatest success of Occupy the London Stock exchange was to occupy the front pages of Britain’s daily papers: the tents in front of St Pauls may have brought the press, but they stayed because the occupation created a sense that the terms of debate had been thrown open: the big issues need not, indeed could not, be left to the political class to debate and decide.
Former occupiers were involved in the City Reform Group but by the time of the Corporation election that radical, reforming spirit had thinned into a genteel, establishment call for moral improvement. Led by Church of England clergymen, supported senior figures in the RSA and WHICH and by conservative MP David Davis, the reform group did not offer a challenge to existing system but a plea for the creation of institutional morality need to make the system work.
It is an agenda of ‘moderate’ reform, centred on professionalization of the industry and ring fencing rather than separation of the deposit-taking and investment arms of the banks, to which the Labour and Conservative parties has already committed themselves and to which the Parliamentary Commission on Banking Standards has added its voice.
The fact that the Labour Party, which once pledged to abolish the Corporation, now participates in Corporation elections as a candid friend of the financial services industry (‘to bring about the reforms needed to create again a City and Corporation of which we can all be proud’, as the City of London Labour Party website has it, is a small but telling signal that it will not be the party to ‘take on the City’ in the way that the Thatcher government took on the unions. It may institute codes of conduct and greater training requirements, plead for responsibility and issue threats of real change if impossibly vague criteria are not met (Labour currently pledge to break up the banks ‘if there is not a genuine change of culture’ in the City. The City has responded and will continue to respond much as certain trade unions responded to calls for restraint and responsibility in 1970s, by issuing solemn declarations that in practice count for little.
Those who took part in the Corporation election trod a difficult path: they had to be moderate and un-newsworthy in order to have any chance of being elected. Yet it is hard not to see the election as one example of the reform of the financial services industry being re-occupied by the political class, denuded of it radical potential and fading into the foreground of politics-as-usual. ‘Make no little plans’, said architect Daniel Burnham ‘for they have no magic to stir men’s blood.’ It is a warning which City reformers need to heed.
The future reform of the Corporation and the industry
One of the odd advantages enjoyed by the Corporation is that, despite its own self-proclaimed role as the ‘voice’ of the financial services industry, many people persist in regarding it as a harmless, historic local government body. However, this attitude may be changing. The pressure for the Corporation to release information about its private income led it to make disclosures in the lead up to the election. The ‘City’s Cash Overview 2012’ which revealed a fund worth £1.32bn was not a full breakdown of expenditure and pressure must continue to understand how it uses its money to advance the interests of the financial services industry. In March the online campaigning organisation Avaaz started a petition that called for the ‘Rememberancer’, the Corporation official who represents the City’s interest in Parliament, to be removed from his traditional seat in the Chamber of the House of Commons.
Understanding and exposing the role that the Corporation plays in shaping the life of London and the nation is important. However, the Corporation - its institutions, history and public spaces - should also be used to fire the widest debate about the future of the financial services industry, which is a debate about what sort of economy and society we want.
2015 will mark the 800th anniversary of Magna Carta, the medieval charter in which the British crown not only undertook to respect traditional liberties but also to respect the freedom of the trading City of London. This freedom has been the source of the wealth and power of the financial services industry. The Magna Carta anniversary is an opportunity to think again about the terms of the licence which the City enjoys: to consider what society requires of the financial services industry in return for the right to make its profits.