Bankers’ Bonuses Put Boris on Back Foot in London Vote

London Mayor Boris Johnson
London Mayor Boris Johnson. Photographer: Oli Scarff/Getty Images

Boris Johnson’s quest to win a second term as London mayor on May 3 is complicated by his need to court voters battered by the government’s austerity measures and his desire to champion the city’s unloved bankers.

Johnson’s pledge to stick up for financiers makes him a rarity among U.K. politicians. His main election challenger, Ken Livingstone, sparked controversy in a February speech calling to “hang a banker a week.” Since ousting Livingstone in 2008, Johnson has argued for lower taxes for the rich and an end to “banker-bashing,” often criticizing the policies of Conservative Prime Minister David Cameron, his own party leader.

“Any Tory candidate in London has got to work doubly hard and Boris has got to be very careful,” said Andrew Hawkins, chairman of ComRes Ltd., which has conducted polls during the campaign. “He needs to be appease the public appetite for bankers’ blood, and recognize he’s going to be shooting a lot of his own voters if he comes down too heavily on them.”

Public criticism of the banks has been stoked by the biggest fiscal squeeze since World War II, inflation that’s outpacing wage growth and the cost to the taxpayer of rescuing Royal Bank of Scotland Group Plc, Lloyds Banking Group Plc and Northern Rock Plc. Johnson’s refusal to join the chorus reflects a recognition that the capital’s prosperity is intimately linked with the success of the financial industry.

“There is a danger that banker-bashing will metastasize into an all-round scorn for all varieties of money-making instinct,” Johnson wrote in an article for the Daily Telegraph earlier this month. “I can’t believe that is in the economic interests of the country.”

Narrowing Lead

Johnson’s lead over Livingstone narrowed to 51 percent from 49 percent, according to an April 23 YouGov Plc opinion poll for the Evening Standard newspaper. That reflects an increase in Labour support as Londoners grapple with rising living costs and the second-highest unemployment rate of any U.K. region, in a city where Labour has led in every election since 1997. A ComRes poll published yesterday put Johnson at 54 percent and Livingstone at 46 percent.

RBS Chief Executive Officer Stephen Hester waived his 963,000-pound ($1.55 million) bonus this year after Labour said it would ask Parliament to vote on the award.

Jobless Londoners

Bank of England policy maker Adam Posen criticized the U.K. last week for cultivating a “fetish” for banks at the expense of Britain’s economic recovery and future generations. London unemployment rose to 10.1 percent in the three months through February, the highest of any region after northeast England. The U.K. average was 8.3 percent.

While the London mayor sets the strategic direction for police, transportation and economic development, without having much day-to-day power over any of them, the size of the capital’s voter base ensures candidates will speak on a much broader platform. The mayor’s personal constituency of 5.8 million voters is the largest of any British politician.

Johnson does “recognize the need for a financial sector and it’s obviously a shame that the financial sector has given ammunition to those who are opposed to it,” said Jon Moulton, the British financier and founder of Better Capital LLP. “Boris is definitely more supportive of the financial community than Ken.”

The financial services industry contributes more than 25 percent of London’s gross domestic product and is a key source of government income. As the financial crisis shrinks those businesses, Britain’s tax revenue is dropping, according to TheCityUK, a lobby group representing the industry.

Shrinking Taxes

Financial companies paid 63 billion pounds in taxes in fiscal 2011, or 12 percent of total revenue, the lobby group said, citing data from PricewaterhouseCoopers LLP and the City of London Corporation. That’s down from 2007, when the industry contributed 14 percent of tax receipts.

Johnson, 47, has been able to reach across the party divide and attract Labour voters away from the 66-year-old Livingstone, according to YouGov President Peter Kellner.

The defectors “think Boris has done well as mayor and regard him as charismatic, even though they feel he is on the side of the rich,” Kellner said in an e-mailed statement. “Compared with Ken-supporting Labour loyalists, they think Ken is less than honest, out of touch with the concerns of ordinary people, and unlikely to make them better off.”

Whatever the outcome of the vote, the banking industry is unlikely to be affected, said Tony Travers, director of LSE London, a research centre at the London School of Economics.

“People who are mayors of big cities want bankers in them,” said Travers in a telephone interview. “The mood music of what politicians say in opposition is less strident and less tempered than in government. If Ken won, it would be very unlikely that he would want to chase the bankers out of London. Banking is such an important industry in London. No mayor is going to want to undermine what is in their city a key industry.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE