Analysis: Deputy Mayor who lobbies for Big Finance

City Hall by Kol Tregaskes on Flickr

Kit Malthouse has been a cheerleader for the financial services sector since his appointment as Boris Johnson’s deputy mayor for business and enterprise in May.

Banker bashing went too far, he told the Evening Standard a few weeks after his new role was announced.’The financial services industry plays a huge part in London’s success … [banks] are the oil that make the rest of the economy work, without them we might as well pack up.’

More recently, in Public Servant magazine, his enthusiasm was even more palpable:

‘They are  one of the jewels in the crown of London … they create hundreds of thousands of jobs … just because there are one or two bad apples doesn’t mean that you should throw out the whole orchard.’

And here he is at a London Assembly economic committee meeting answering a question about whether there’s a real risk of large financial institutions leaving London.

‘It is very real….It is very real from a financial services point of view that businesses will and can relocate pretty much at will,’ he replies. He later adds: ‘If people believe that the political leadership in a city or in a country is largely hostile to their industry they just will not go there.’

As deputy to Boris Johnson, himself an unashamed supporter of banks and bankers, Malthouse’s role as an industry cheerleader was inevitable.  He also has a personal interest in the sector: trained as an accountant, he is director of Alpha Strategic, which invests in hedge funds. He is also a director of independent finance company County Finance Group, which lends on fixed assets and has benefited from the credit crunch.

Both positions are declared in the London Assembly’s register of members’ pecuniary interests.

What hasn’t been declared – and needn’t be, because it is an unpaid role – is Malthouse’s membership of the board of TheCityUK, the financial services lobby group part-funded by the Corporation of London.

The deputy mayor’s acceptance of this position, which he has held since June, brings him even closer to the financial services sector and its hugely powerful lobbying machine. But is this at the expense of wider business interests, which many would argue are just as important to London?

Mr Malthouse’s only other unpaid board positions are with London and Partners, which promotes the capital and the London Hydrogen Partnership which is aiming to advance the commercialisation of hydrogen.

TheCityUK job apparently involves lobbying against EU regulation of banks and insurers.

His position raises the awkward issue that whenever there is a conflict between the policy demands of the banks and those of other industry sectors that affects London, that the deputy mayor’s independence could be questioned.

The Public Servant article makes clear that financial services are his priority. ‘High-tech industries, the creative and design sector and the creation of a global life science cluster in the capital are all important themes for Malthouse to pursue, but none can match the lucrative benefits that banking and investment already bring.’

The problem here is not that Malthouse is supportive of what is, without doubt, an industry of vital importance to London and Britain, and which is in desperate need of good PR in the wake of so many scandals.

He’s right that big finance creates jobs and funds businesses.

The problem is that the sector is already massively powerful. And it employs that power to argue against the interests of other sections of British industry.

Pre-crisis, it argued for the lion’s share of Britain’s resources and attention, less regulation and a favourable tax regime because it was so successful.

‘Britain’s traditional manufacturing-based exports are simply failing to make headway,’ said a commentator on the British Bankers’ Association website in 2006. ‘This country needs to focus its resources on those sectors that are most productive,’ agreed the BBA’s chief executive.

‘In particular, this means ensuring the right business environment for financial services if the economy is to stay on track.’

Post-crisis, the industry still wants less regulation and a favourable tax regime, but now it says promoting one sector over another is damaging.

‘Policies that seek to differentiate between sectors, promoting one at the expense of another, risk lagging behind the reality of business developments, with harmful consequences for wealth creation,’ argued TheCityUK’s policy director Howard Miller in 2011.

His post was responding to reports of faltering manufacturer confidence in the regions, which had prompted calls for government support.

TheCityUK’s outgoing head Chris Cummings penned an article around the same time discussing the needs of manufacturing and other business in Sheffield. The penultimate paragraph focused on financial services as ‘a major employer in its own right across the UK’, with more than 9,000 staff in Sheffield

‘Gross Value Added of financial services in Sheffield is £707m,’ he wrote. ‘South Yorkshire has a total of 15,153 employed in financial services.’

Suddenly, the Sheffield businessmen seem like small fry and finance like a thriving regional industry.

Big Finance already has its own local authority (the Corporation of London) – and its own Lord Mayor – to make the case for its preferential treatment.  The Corporation is particularly good at lobbying government, declaring that it influenced 17 ‘government and business decisions’ between April and June 2012.

As the Bureau revealed earlier this year, the financial services sector has a lobbying budget close to £100m.

Since 2010 it’s had TheCityUK to give it a unified voice and build relations with government – and the opposition.

It has one in six peers on its payroll.

Its relationship with its regulator is arguably still much too close.

It already has Boris as a cheerleader.

Wouldn’t it be better for the high tech industries, for life sciences, for the creative and design sector – for every other business in London – if it didn’t have the Mayor’s deputy as well?

A Greater London Authority spokesperson said: ‘Kit Malthouse sits on the board of TheCityUK in his capacity as Deputy Mayor for business and enterprise. The financial services sector plays a highly significant role in the capital’s economy, employing around 60,000 Londoners, and it is entirely appropriate to engage with the sector in this way.’