David Prosser: Exodus? What exodus? Our tax system is not as bad as the critics claim

Outlook: The Liberal Democrats' windfall tax no longer looks so punitive now we have seen what the IMF is proposing for the G20 as a whole

The extent to which the Liberal Democrats will be able to insert their policy programme into the agenda of the next government is becoming the most fascinating question of this campaign. And while we don't yet know which policy areas are their definite priorities and which they might be prepared to let slide, it's worth noting that other than Nick Clegg himself, Vince Cable has been the main star of his party, particularly before the debates.

It is in that context that the Lib Dems' views on the City are beginning to give some in the Square Mile real cause for concern. Never mind the effect of a hung parliament on the public finances and our AAA credit rating, some of those doom-laden warnings you're reading about the dangers of no party winning a clear majority may just be motivated by fear of what Messrs Clegg and Cable might have in store for the banking community.

Their proposals certainly go further than those of either Labour or the Conservatives. Separating the banks' retail and investment operations – in the same way as the US has proposed – is just the start of it. The Lib Dems would also introduce a 10 per cent windfall tax on bank profits and limit cash bonuses to a maximum of £2,500 a year. For Bob Diamond and his colleagues, it is hardly worth getting out of bed in the mornings for that kind of small change.

How disastrous would this programme be for Britain's financial services industry? Well, there would no doubt be a panic in the City, with dire predictions of a mass exodus of both the biggest institutions and their brightest talent. But whether the departures would really be so numerous is questionable.

For one thing, the Lib Dems' windfall tax no longer looks so punitive now that we have seen what the International Monetary Fund is proposing for the G20 as a whole. The IMF has yet to cost out its double whammy of new taxes on the banks – and national governments would have some freedom to introduce the levies in the best way they see fit – but it's not beyond the realms of possibilities that the IMF tax burden actually comes in at a higher price than what the Lib Dems want to do.

As for caps on bonuses, the Lib Dems may ban the handing out of bundles of banknotes, but they feel much more relaxed about the payment of large bonuses in the form of shares that are locked in for an extended period. It would still be worth the City's highest paid superstars staggering into the office each morning.

Every time Mr Cable is told that the intellectual property of the City is an asset that can simply be relocated elsewhere, he makes the same point. Taxes in Britain rose sharply last year, he points out, but applications from Britons for expatriate status in Switzerland actually fell. For all the talk of highly paid hedge fund managers decamping to Zug or Zurich – and the occasional example of someone actually making good on the threat – the figures suggest that the number of departures from these shores has been slowing.

To this end, the latest edition of the Sunday Times Rich List, published at the weekend, makes interesting reading. It features the likes of Guy Hands, the private equity tycoon who has quit the mainland for Guernsey for tax purposes, but it also notes that of Britain's 53 billionaires, 24 are foreign-born but have chosen to make this country their home at least part of the time. Maybe our taxation system is not quite so off-putting as the naysayers would have you believe.

By the way, the Rich List also includes 170 folk who have made their money from sectors such as banking and the hedge fund industry. That's up from 160 a year ago. Financial crisis? What financial crisis?

Where did the Farepak cash go?

Finally, some good news for up to 120,000 victims of the collapse of Farepak, the Christmas savings club that went bust just a couple of months before the festive season of 2006. They are at last getting a bit of cash back, courtesy of the former directors of the company that ran the club, and the 15p for each £1 lost is three times what was originally envisaged.

Still, losing more than half your savings in this way – following the collapse, several retailers clubbed together to offer Farepak customers vouchers for their stores – is hardly a cause for celebration. Particularly as, almost four years after the demise of Farepak, a string of questions about the scandal remain to be answered.

We still do not know, for example, what happened to tens of millions of pounds of savers' money, which appears not to have been ringfenced by Farepak in any way. Nor do we have a clear picture of exactly what role in the scheme's collapse was played by HBOS, the main bank to the company. And there has been no explanation of how what was then the Department for Trade and Industry allowed the collapse to happen, though there has since been new regulation governing Christmas savings schemes.

Above all, the allegation that Farepak continued to accept savers' cash payments even after it realized the end was the nigh has never been satisfactorily answered. There has been no legal action against anyone at the company – and no explanation why this was not deemed appropriate.

One can't help contrasting the Farepak case with another high-profile instance of failed regulation: the collapse of Equitable Life. Its savers were recruited from the professional classes and included prominent High Court judges and MPs. When the Government failed to accept liability for savers' difficulties, Equitable's customers were able to sustain a high-profile, powerful campaign for justice that has, in the end, been very successful. Most customers of Farepak, on the other hand, were at the bottom end of the income scale, and could pull no such strings as they fought to get their money back.