London's future as a financial centre is not threatened by the Labour Party, European economic and monetary union or the pusillanimity of the London Stock Exchange board. But it will certainly be affected by all these things.
The Labour Party (which, polls suggest, will win the next general election due by May 1997) has plans to improve financial regulation. It also wants to stretch - by legislation, codes of practice or example - the time-horizon of investors and the end-users of capital.
The Labour leadership says this is a question of culture: investors and companies are already adjusting their views on short-termism and corporate governance, in reaction to the 1980s.
But Labour's plans for financial supervision are worrying. Although Labour policy-makers insist they won't spoil the party, behind the scenes they are pressing for features that would distinguish their reforms from what the Tories might do. No-one denies that London financial regulation needs a face-lift, and Labour at the moment sounds like a party the City can do business with. But some doubters predict that, after an election victory, a few socialist hobby-horses will be hauled back out of the toy-cupboard (see article beginning on page 62).
Britain under Labour is also more likely to sign up for European monetary union (Emu), although the party says it intends to reassure itself (thanks to the opt-out negotiated at Maastricht) that the benefits will outweigh the costs. Will London as a financial centre be better off in or out of Emu? The debate is raging. One eminent bank chairman has argued that, while Emu could make the UK uncompetitive, there is little or no chance of Frankfurt or Paris usurping London's role as the financial centre of Europe, so why risk the dangers of fiscal harmonization with the EU hard core. Others argue that the only way to dominate the Euro securities market - which London is perfectly equipped to do - is to be in at the beginning. But is keeping Finanzplatz London ahead of the game a good enough reason for ignoring the cost/benefit effects on the whole country?
While London as an offshore centre looks set to thrive, there is something rotten at its heart - the London Stock Exchange. A battle against vested interests and Luddism has cost its last two chief executives their jobs (see the article on the dismissal of Michael Lawrence beginning on page 24). His predecessor Peter Rawlins resigned after the Taurus fiasco, an attempt to placate every possible selfish interest, apart from that of creating an effective settlement system. The Lawrence débacle has again lost London time, money and prestige in the battle for international trading volume. A handful of pre-eminent investment banks - so innovative and flexible when it comes to working with other people's regulations - apparently, when regulating themselves, can't be relied on to put the interests of the marketplace before their own. That's a pretty short-sighted view. And the Labour Party, which already has a jaundiced view of self-regulation, will take note.
Labour wants to fold the self-regulatory organizations into the Securities & Investments Board, yet to keep practitioners involved. It has talked about taking bank supervision out of the Bank England, and then said this is only one of many possibilities. Its latest utterances have been so conciliatory as to be almost incredible. No, the City is told, Labour no longer has plans for a compulsory levy on companies to pay for training. Perhaps, with a little more persuasion, it will also drop plans for a windfall tax on privatized utilities.
The "stakeholder society" trumpeted by Labour leader Tony Blair during a visit to Singapore in January seems a less frightening concept than alarmists first feared. It means simply encouraging awareness that a company has responsibilities to a group wider than just its shareholders - to its employees, suppliers, customers and maybe its creditors too. Nothing wrong with that. (Shareholders of investment banks have long wondered who comes first in the pecking order.) But since the stakeholder concept appears to be little more than a cultural preference, we are again left wondering how Labour will make its mark during its first term of office since 1979. Fiscal experts suggest that the next government will inherit a level of taxation which is the lowest in Europe, lower than Greece. Without raising taxation or radically cutting expenditure Labour will have little room for manoeuvre, and there is no sign that it is preparing for such shocks.
It seems that, for a while, Labour's policies, especially on financial regulation, are malleable. Now is the time for interested parties to talk to the Labour Party about the future of London. The last regulatory changes to London were done with conviction. This may have been flawed, but at least the reforms displayed a vision. Civil servants remember how Norman Tebbit, then trade and industry minister, pushed through the Financial Services Act with enormous self-confidence about the marketplace that he was creating.
Now the financial industry is alone. There is no Labour vision - bad or good - about financial system reform. It's up to us to fill this vacuum before it becomes cluttered with half-baked ideas.