The Liberal Democrats have a dangerous vision for the City of London

31 August 2021

5:53 AM

31 August 2021

5:53 AM

Liberals have always set great store by laws and declarations. It was joked about Lord Loreburn, the liberal Lord Chancellor in the years before the First World War, that if told the Germans had landed he would immediately have taken steps to obtain an interim injunction from the Chancery Division requiring an immediate withdrawal. These days something similar seems to be happening as regards the Liberal Democrats’ approach to climate change.

Last Thursday Ed Davey took aim at the City, which he has decided to add to the party’s growing list of climate change villains. In a curious interview with the Guardian he put forward a modest proposal to deal with the problem: his demands included an immediate ban on the listing in London of any new company whatever involved with oil, coal or gas, and the outlawing of any attempt to raise a loan, or issue any bonds, to finance exploration for any of these commodities. Those fossil fuel companies already quoted in London would be graciously allowed to remain there. But after two years would be summarily ejected unless they pledged carbon neutrality by 2045, at which time all fossil fuel concerns would also be compulsorily delisted.

Grand gestures of this kind are nothing new for the Lib Dems. Most of the local authorities they run have already issued solemn declarations about a ‘climate emergency.’ And in June Ed Davey co-sponsored with Caroline Lucas a quixotic Climate and Ecology Bill that would require Boris Johnson to declare his own climate emergency: impose on the government, among other esoteric things, a duty to ensure the UK ‘expands natural ecosystems, wherever possible, and enhances agroecosystems for the purposes of safeguarding their carbon sink capacity and their resilience to global heating’, and set up a Citizens’ Assembly on the Climate and Ecological Emergency to prevent any backsliding.

Measures like these are pretty obvious political posturing: no one honestly thinks they will have much effect. By contrast, Ed Davey’s latest pronouncement on the City seems to be entirely serious. If it is, it should worry us because it is both foolish and potentially disastrous.

If we did as he suggests, he says, we would ‘show a leadership role to other financial centres. I think New York under President Biden would have a real problem if the UK stole the march.’ One might have thought you steal a march on competitors by taking business from them, rather than turning it away in their favour, but no doubt Ed knows a thing or two about finance that we don’t. The idea of traders on Wall Street shaking in their sneakers at the prospect of London setting a trend by declining lucrative business is positively preposterous. As for Joe Biden, it is true his backers are an unpredictable group: but regardless of the special relationship, I wouldn’t bet he falls over himself to emulate this piece of virtue signalling from the UK.

Nor, for that matter, would Ed’s idea likely prevent a single dollar or Euro going to finance the fossil fuel trade, or keep a single barrel of oil in the ground. A hundred and fifty years ago, when London was not only the centre of world finance but essential to it, it might have had some effect. Today there are plenty of people not only in New York, but also in Frankfurt, Tokyo or for that matter Shanghai who would be very happy to make the arrangements London won’t.

Meanwhile, such strategies would do enormous harm to the City. It goes much further than the profits from financing the oil industry that would vanish overnight from the Square Mile and reappear in some other financial hub. The reason the City is so successful is precisely that it is free from political interference. If your money is lawfully gained and not obviously extracted from people groaning under the heel of some kleptocratic strongman, EC1 is happy to handle it and continue to handle it without moralising. But would you float in London if you knew that at any time some well-meaning politician with a sensitive conscience or an axe to grind could persuade the City to boycott a particular class of business? It seems doubtful. If Ed Davey had his way, the result would be a wholesale flight from London on the basis that the political risk was unacceptable.

Ed Davey’s suggestion, thank heavens, has no chance of being taken up. But it may suggest something about his politics which could provide Boris with a bit of comfort. His preferred image is that of a steady pair of hands in the mould of Vince Cable, the down-to-earth but well-informed man who saw the 2008 crash coming before anyone else did. But, especially when taken with his other publicity-seeking antics in 2021, his latest pronouncement on the City shows another Ed Davey: a political lightweight with a vanity that politically puts you in mind not so much of an elder statesman than of the Lib Dems’ contemporary version of Aesop’s frog. And we know what happened to the frog as soon as she encountered a beast who was genuinely more substantial than she was

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