Hard-talking Clegg stands up to City
Tuesday, 16 March 2010 5:46 PM
Nick Clegg refused to compromise with a City audience as he outlined why the banking sector needs urgent reform.
The Liberal Democrat leader's comments in a major speech at the Guildhall come just a week before he and Treasury spokesman begin a charm offensive against the City. It is clear that process has not yet begun.
He backed a straightforward banking levy, taking a ten per cent cut on the profits of banks which have benefited from taxpayers' money. The Lib Dems estimate this would bring in £2 billion.
"We are by far the most trenchant and critical of what's happened in the banking industry," Mr Clegg said, before reiterating his view that the City bore significant responsibility for the economic crash of 2008.
"I don't believe it's fair that one sector has held a gun to the head of the British economy."
Put your questions to Nick Clegg
Mr Clegg said that he wanted a City full of "dynamism" and "animal spirits" but insisted that "we need to restore balance".
He outlined the need for "painful" spending cuts to confront the public deficit and offered an even bleaker picture about the economy's ongoing vulnerability.
In addition to the "huge liabilities" springing from the economy's reliance on the financial services sector, Mr Clegg said Britain is not protected by being part of a reserve currency.
"I think when it comes to the banking system, people are living in denial about quite how vulnerable we are as an economy," he warned, describing Britain's economy as being placed in a "unique constellation of vulnerabilities".
He was expanding on a warning in his speech that if Britain could not persuade the public that spending cuts were needed the "journey" would not be possible.
Analysis: Clegg can't erase deficit doubts
"We will instead follow Greece down the road to economic, political and social disruption," he warned.
The Lib Dems' main focus is on wooing the voters, not the bankers. Mr Clegg's party backed a policy ruling out all income tax for those earning under £10,000 at its spring conference in Birmingham at the weekend.
"Tax cuts for millions will sweeten the very bitter pill of the largest fiscal contraction in modern history," Mr Clegg added.
"If we do not implement these changes it will be impossible to rally people behind public sector spending cuts and any serious attempt to cut the deficit will fail."
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