David Prosser: Why we have to call the banks' bluff

Outlook The City's scaremongers are at it again. This time it is Robert Walters, one of the square mile's best-known headhunters, who is warning that "hordes of people are leaving certain banks" (specifically, he means the poor souls who haven't had huge bonuses this year because they work at banks with a large taxpayer stake).

Naturally, Mr Walters hasn't fully explained quite what he means by "hordes". Similarly, when pushed last week, Stephen Hester, the boss of Royal Bank of Scotland, admitted he could not actually produce the figures to justify his claim that investment bankers quitting because of bonus restrictions had cost his bank £1bn in extra profit.

No one is denying that there are people who have left the City for pastures greener over the past few months, no doubt, in some cases, specifically because of higher taxes or restrictions on bonuses. But the executive lounges at Heathrow have seen only a trickle of City folk waiting for flights to Geneva or the other centres supposedly poised to snap up our brightest talents. And if those leaving were so fickle that they upped sticks because of a one-off bonus reduction, or the prospect of the 50p higher rate of tax that comes into effect next month on the highest salaries, they were always going to find one excuse or another to say goodbye to the UK.

London does have to compete with other international cities for financial services talent. But it has plenty of attractions – time zone, language and still, believe it or not, relatively low taxation rates – to tempt expatriates to come here from elsewhere. Certain industries barely exist in other jurisdictions. And once people are here – whether they're British or not – they build lives and it becomes a wrench for many of them to move on.

The financial services industry has held us to ransom for too long. Never mind all the other benefits of rebalancing our economy so that it is more diversified, curtailing the City's ability to threaten to withdraw its labour by reducing the impact of that happening is reason enough to attempt to build a different type of industrial environment in a post-credit crunch world.

All that said, it remains difficult to act unilaterally when it comes to taxing or regulating the financial services industry. The one-off supertax on bankers' bonuses the UK has imposed this year would be difficult to extend into the future, and other levies specifically aimed at the City will meet fierce resistance.

Back then, to the transactions tax, for which international support is growing by the day – most of Europe and Japan now seem to be signed up. The International Monetary Fund is due to give its views on a 0.5 per cent levy on banking transactions shortly. It will soon be time for one final push.