As Chancellor John Healey stands at the Dispatch Box today, likely unveiling yet another Budget that hikes taxes and worsens our national debt, he might do well to remember the milestone that the City of London has just marked.
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City → stand → London
Forty years ago, a regulatory earthquake shattered the clubby confines of the Square Mile – and unleashed a boom in wealth the likes of which our country had not seen for years.
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country → shatter → years
On October 27, 1986, what the financial press had christened 'the Big Bang' pulled Britain's stagnant financial sector out of its postwar doldrums, thrusting it into the crosshairs of global competition – and transforming the City from a polite, bowler-hatted backwater into the financial capital of the world.
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christened → christen → world
Outdated restrictions on banks and stockbrokers were scrapped.
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restrictions → scrap → banks
Foreign banks were welcomed to transact and compete in London.
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banks → welcome → London
And electronic trading began to overtake the rumbustious face-to-face market that had stood, in some respects, since the 17th century.
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that → begin → century
At the heart of this institutional storm of course stood Nigel Lawson, Margaret Thatcher's formidable Chancellor.
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Lawson → stand → course
He believed the truism that 'capital flows where it is treated best' – which is to say that money tends to move to the countries and markets where investors calculate that they will get the best return for the least risk.
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they → believe → risk
To that end, Lawson stripped the City of its crushing regulatory barriers and broke up state-sanctioned cartels, clearing away the cobwebs of institutional complacency and bringing in the white heat of competition.
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Lawson → strip → competition
Alasdair Haynes, who was working on the floor of the London Stock Exchange (LSE) in October 1986, remembers leaving the frantic, open-outcry pit on Friday evening, and expecting to come back to the same chaos on Monday.
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who → work → Monday
Instead, he walked into an empty room.
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he → walk → room
'The trading floor was practically a desert – it was mind-blowing,' he says.
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he → blow → ?
Haynes went on to become a pioneer of electronic trading, establishing the hugely successful Aquis Exchange.
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Haynes → go → Exchange
In March 2023, I had lunch with Nigel Lawson at his flat in Eastbourne, East Sussex.
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I → have → Eastbourne
Even at 91 – and, as it turned out, with only a few weeks to live – his mind was sharp.
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mind → turn → weeks
At the heart of this institutional storm stood Nigel Lawson, Margaret Thatcher's formidable Chancellor.
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Lawson → stand → storm
He believed the truism that 'capital flows where it is treated best'
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it → believe → truism
'Genuine, full-throated reform was the only answer,' he told me.
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he → tell → me
'The old-school restrictions meant the London market was woefully under-capitalised.'
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market → mean → ?
In plain English: it lacked the clout to take on the financial giants in New York and Tokyo.
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it → lack → York
He freely acknowledged that his revolution, necessary though it was, had drawbacks – including, some would argue, a cold, transactional culture dominated by the giant American investment banks, and perhaps a degree of excessive risk-taking that helped to presage the City's part in the 2008 Great Financial Crash.
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that → acknowledge → Crash
But he looked back, overwhelmingly, with pride.
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he → look → pride
Which brings me again to the Labour Party.
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Which → bring → Party
It is worth remembering many in Opposition under Neil Kinnock opposed the Big Bang – and especially, of course, Lawson's tax cuts, which saw corporation tax slashed from 52 per cent to 35 per cent, the basic rate of income tax from 30 per cent to 25 per cent, and the top rate from 60 per cent to 40 per cent.
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tax → remember → cent
Yet these were the very reforms that helped to rescue Britain from the statist torpor of the previous decade, paving the way for the boom of the 1990s.
Labour railed against the Big Bang, predicting financial ruin.
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Labour → help → ruin
In January 1986, future leader John Smith warned in the Commons that 'the character of the City will change fundamentally' and foretold 'a period of depersonalisation as institutions become conglomerates'.
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institutions → warn → depersonalisation
Brian Gould intoned that the City under Thatcher was turning into a 'casino'.
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City → intone → casino
Yet in the end of course, the party was forced to concede that Lawson's reforms created the golden goose that has helped to fund Britain's public services ever since, on which Labour loves to lavish so much tax money.
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Labour → force → money
It's hard to calculate precisely how much wealth was generated by the Big Bang, but it is certainly in the billions.
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it → calculate → billions
Labour has never lost its ideological hostility to financial services – and to business more generally.
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Labour → lose → business
Since Keir Starmer – a human-rights barrister who understood nothing of finance or enterprise – took over in July 2024, the party has undermined the City, crushing growth and clobbering wealth-creators with a punitive and anti-enterprise tax regime.
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party → understand → regime
Famously, Andy Burnham has an even weaker understanding of how markets and finance work – so no wonder that today, yet more blows are expected to land.
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blows → have → understanding
As the Mail's esteemed City editor Alex Brummer reported yesterday, rumours are circulating around Westminster and the City that British banks – already subject to a punishing tax 'surcharge' – are set to be hit with even higher 'windfall' levies.
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banks → report → levies
Labour has never understood that you can't tax a sector, or a country for that matter, into prosperity.
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you → understand → prosperity
And you certainly can't maintain London as a global financial capital by treating its major institutions as a piggy bank to be smashed whenever you over-borrow and over-spend, as every Labour government has throughout history.
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government → maintain → history
The truth is that as the entrepreneurial zeal sparked by Lawson has faded, the City's status has diminished with it.
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status → spark → it
Back in 2006, London was still the number-one stock exchange in the world for companies to list for the first time, in what's called an Initial Public Offering.
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what → list → time
Today, we languish at a dismal 23rd, behind Mexico and Oman.
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we → languish → Mexico
This is what happens when you choke a global success story, as the Tories – to their shame – did in the banker-bashing climate that followed the 2008 crash, and that Labour has redoubled since it took over, in a toxic cocktail of bureaucratic over-regulation, institutional risk-aversion and political neglect.
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it → happen → regulation
Burnham is not going to turn this around and Healey is no Lawson.
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Healey → go → this
…and 11 more, not listed.
The Aporia
