The City’s big players are ready to bolt if Labour comes into power

Plenty of City folk are readying to decamp, rather than face the prospect of increased income tax and other punitive measures coming their way

The City made up its mind about John McDonnell long ago (Reuters)

My senior fund manager friend leaned forward over the table, and asked, lowering his voice: “Have you got your bolt hole yet?”

I was puzzled. Perhaps he thought my marriage was on the rocks and I needed somewhere to go. Or did he think I’d been up to some sort of financial no good, and required a safe haven?

Neither, touch wood, is true. It turned out he was referring to the prospect of a Labour government. “Mine’s in Switzerland. I‘ve got an apartment there, I’ve worked it all out, I can live and work there, I can come and go, still see the family, and not have to pay higher taxes.”

Others, he said, were doing the same. He seemed surprised that I hadn’t planned my own escape route.

We did not get into the detail, about how he was going to structure his tax affairs, but I didn’t doubt him. Indeed, subsequent conversations revealed that he was correct: plenty of City folk are readying to decamp, rather than face the prospect of increased income tax and other punitive measures coming their way.

Which is why the shadow chancellor John McDonnell’s current drive to woo the City will prove so fruitless.

In his speech at Bloomberg’s headquarters, to launch his campaign, McDonnell proposed, a “new start in the relationship between Labour and the finance sector”. Financial services, he claimed, will have a “seat at the policy-making and policy delivery table” under a future Labour government.

He insisted the City has a role to play in the “transformative programme” he will seek to introduce if his party wins the next general election.

Quite what McDonnell had in mind for that transformative programme was outlined in a subsequent TV interview: “At the end of the day, I want a socialist society. And that means transforming in a way which radically challenges the system as it now is. And I think that’s what we’re doing. And what’s interesting, we’re taking people with us, because people see that there has to be that transformation.”

Added McDonnell: “We cannot allow another crisis to occur that occurred in 2007 where we all have to pay for that.”

Apparently, if he is true to his word, McDonnell wants City representatives to be “at the policy-making and policy-delivery table” when Labour’s plans are hardened and approved. Try as I might I cannot imagine who they will be, and, more to the point, how they will make themselves heard.

We’ve been here before with Labour. John Smith, the then shadow chancellor, was ridiculed in parliament for his efforts, by Michael Heseltine: “I hear wherever I go that the right honourable and learned gentleman has become a star attraction in the City. Lunch after lunch, dinner after dinner, the assurances flow. Not a discordant crumb falls on to the thick pile ... All those prawn cocktails for nothing. Never have so many crustaceans died in vain. With all the authority I can command as secretary of state for the environment, let me say to the right honourable and learned member for Monklands East [John Smith], ‘save the prawns’.”

Smith’s “prawn cocktail offensive” actually made some headway. The City respected Smith (liked would be putting it too strong). He was viewed as a moderate, sensible. He was also shadow chancellor during a period of economic recession, when the Tories were not highly regarded by the business community.

Then came Tony Blair’s push. He drew appreciative nods with his early, ground-breaking moves, like scrapping clause 4 of the Labour constitution, so removing the lingering doubt that privatised utilities might be renationalised, and making the setting of interest rates independently of government and political influence.

Blair and his colleagues also spoke the right language. Peter Mandelson’s declaration of being “intensely relaxed about people getting filthy rich as long as they pay their taxes” might have caused eyebrows to shoot skywards in some party circles, as being too much, even for capitalism-embracing New Labour, but it was well received in the City.

Now we have McDonnell and his so-called “cup of tea offensive”, seeking friendly chats with business leaders to try to win them round to Labour’s way of thinking, claiming he wants them in the room, around the table, rather than outside.

But, compared with his predecessors, McDonnell really is wasting his time. The City is not stupid. It can see what this shadow chancellor is about. That he despises capitalism; that he, along with his boss, Jeremy Corbyn, aspires to see the recreation of a socialist, Venezuelan-type model in the UK, even though Venezuela’s economy has come close to total collapse.

The City is acutely aware, too, McDonnell and Corbyn have come a long way precisely on the back of attacking the financial services industry, and all it stands for. Suddenly, they’re making overtures – after a fashion. Why?

Because, as they say they want to change the system, and if they’re going to get their initiatives through – such as workers being encouraged to buy their own companies – it will be much easier with City support than without. Because the City represents a rare international success, a huge magnet for overseas investment, and a major plank in our economy. And because they need its capital-raising expertise, and its cash. As McDonnell says: “I don’t expect some people to be overjoyed at having to pay a bit more in income tax or corporation tax or at the introduction of a financial transaction tax.”

Not overjoyed is one way of putting it. As my pal indicated, the City long ago made up its mind about McDonnell, well before he began his cup of tea offensive. Never have so many tea leaves been picked in vain.

Chris Blackhurst is a former editor of The Independent, and executive director of C|T|F Partners, the campaigns and strategic communications advisory firm.