What would a Labour government mean for financial services? A Cicero Group overview

Painting The City Red

Is the Financial Services sector ready for a Labour Government?

Cicero Group | July 2019

Cicero Group

Painting The City Red | 1

Contents Foreword

2

How does the City feel about a Labour Government?

3

Labour’s agenda for financial services

6

- Sustainable Finance - Investment and Productivity - Taxation - Ownership - Democratising the Workplace - Ageing Society - And of course...Brexit

6 7 8 8 9 10 10

John McDonnell - What kind of Chancellor will he be?

11

11 12 12

- The Wider Treasury Team - Key Advisers - Key Organisations and Influencers

Cicero Group

Painting The City Red | 1

Foreword The UK is in a period of major political uncertainty. We will imminently have a new Conservative Prime Minister, who will have only the narrowest Parliamentary majority; we are unsure whether we will leave the EU with or without a deal on 31st October, or see a further extension of the deadline; and we do not know whether there will be an early General Election, or if this Parliament will go for a full term to 2022.

If an early election does come along, the current polling points to a highly unpredictable outcome, with four parties all hovering around a similar level of 20-25% support. Labour presently holds a narrow lead, and we know from past experience that the party is capable of growing their support during the campaign – as Jeremy Corbyn famously did in 2017.

For this reason, the financial services sector should take seriously the prospect that the next General Election will return a Labour Government – or perhaps a Labour-led coalition. The party has a policy programme that could have a major impact on the sector and is serious about implementing this programme.

This paper is intended to provide firms in the financial services industry with insights into the key themes that underpin Labour’s agenda for financial services and some of the specific policies the party would pursue, ranging from sustainable finance and an investment-led economy, to new ownership structures and more democratised boardrooms. While Labour positions many of the reforms as being in line with mainstream policy in many major economies, such as Germany, there is no doubt that, taken as a whole, their programme would amount to a radical package for the financial services industry and the economy as a whole.

Alongside this, we wanted to gain an understanding of the City’s attitudes towards a Labour Government, how likely they consider this outcome to be, whether they are preparing for it and their views on the party’s key policies. We therefore conducted a survey of financial services organisation to cavass their views. We found that many firms do anticipate Labour winning the next election, but that most are not making extensive preparations for this outcome.

Our findings are summarised in more detail in the first section of the paper.

We also consider the man at the forefront of developing Labour’s policy agenda for financial services, John McDonnell, and assess what type of Chancellor he might be. McDonnell has been instrumental in the development of ‘Corbynomics’ and would be a hugely important figure in taking forward Labour’s programme in government. He has shown himself to be a serious thinker and someone more willing to engage with the City than his past reputation would suggest.

We hope that you find this paper to be a useful guide as you consider the impact of a Labour Government on the financial services sector.

If Cicero can be of assistance to you or your organisation in preparing for such an outcome, please don’t hesitate to get in touch.

Cicero Group

Painting The City Red | 2

How does the City feel about a Labour Government?

Assumptions are often made about what the City sector thinks about the prospect of a Labour Government. Cicero has set out to test these assumptions by asking 25 financial and professional services firms a range of questions about a Labour Government, the party’s policies, and their views on and engagement with the man who could be Chancellor, John McDonnell. A number of striking findings emerged.

Firstly, those we surveyed in the sector consider it marginally more likely than unlikely that Labour will win the next General Election. 4% consider it very likely that the party will win while 48% consider it quite likely. However, with 48% considering it quite unlikely that Labour will win, it is clear that opinion on this matter is very finely balanced. This is unsurprising in view of the current opinion polling which shows Labour and the Conservatives virtually neck and neck.

How likely do you think it is that the Labour Party will win the next General Election?

Answered: 25

Skipped: 0

Very likely

Quite likely

Quite unlikely

Very unlikely

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Despite on balance thinking it likely that Labour will win the next election, the majority (56%) of firms we surveyed are making no preparations or only very limited preparations for this outcome. 36% are making some preparations but only 4% are making extensive preparations. This suggests that the City may need to step up their preparations in the coming months, with an early General Election remaining a very real possibility.

Is your organisation actively making preparations for the possiblity of a Labour Government being elected at the next General Election?

Answered: 25 Skipped: 0 Yes, we are making...

Yes, we are making some...

We are making only very...

No, we are not preparing at...

Don’t know

0%

Cicero Group

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Painting The City Red | 3

In terms of policies, we asked respondents to choose up to three policies from a range of options which their organisation is most supportive of, and up to three that their organisation is most opposed to. The highest level of support was recorded for Labour’s green economy policy, selected by 48% of respondents, followed by the party’s Brexit strategy (28%) and industrial strategy (24%). The party will be encouraged to see this relatively strong support on the green economy, which is one of the key pillars of Labour’s prospectus for the economy and financial services. However, they will be concerned that almost a quarter (24%) selected ‘none of the above’. No support at all was recorded for the policy on nationalisation or a Financial Transactions Tax (FTT).

In terms of the policies that our survey respondents are most opposed to, the FTT was the most frequently cited (by 48%), closely followed by the party’s wider plans on corporate taxation (39%) and nationalisation (39%). However there is further encouragement for the party in that no respondents chose Labour’s Brexit strategy, industrial strategy or the National Investment Bank as one of their top concerns. Low levels of opposition were also found to plans on the green economy (4%), regional development banks (9%) and personal taxation (13%).

Which aspect(s), if any, of Labour’s policy programme is your organisation most supportive of? (Select up to three) Answered: 25

Which aspect(s), if any, of Labour’s policy programme is your organisation most opposed to? (Select up to three)

Skipped: 0

Answered: 23

Corporate taxation

Corporate taxation

Personal taxation

Personal taxation

Nationalisation

Skipped: 2

Nationalisation

Corporate governance...

Corporate governance...

Financial transactions...

Financial transactions...

Brexit strategy Brexit strategy National Investment Bank

National Investment Bank

Regional development...

Regional development...

Industrial strategy

Industrial strategy

Green economy

Green economy

None of the above Don’t know

None of the above

Other (please specify)

Don’t know

0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

We asked respondents to rank how their organisation would feel about the election of a Labour Government on a scale of 1-7, where 1 = very comfortable and 7 = not at all comfortable. The average came out at just below 5 suggesting that on balance the organisations we surveyed are not comfortable about the election of a Labour Government. We asked the same question specifically about the appointment of John McDonnell as Chancellor and found an almost identical result, suggesting that Mr McDonnell personally is of no more or less concern than the party as a whole.

We also set out to test the assertion that is sometimes made that the City is more concerned about the election of a Labour Government than it is about Brexit. When asked to rate how comfortable their organisation feels about Brexit on the same 1-7 scale, the average result among our sample came out at just under 4.5 – suggesting that this group is slightly more concerned about the election of a Labour Government than it is about Brexit.

Cicero Group

Painting The City Red | 4

How does your organisation feel about...?

5 4.9 4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1

Average Election of a Labour Government

John McDonnell as Chancellor

Brexit

Finally, we asked our respondents about what engagement they have had with the Shadow Chancellor, John McDonnell. We found that the most frequently cited engagement was simply having attended an event or conference at which Mr McDonnell has spoken, which was selected by almost half of our sample (48%). Next most common was having met with McDonnell as part of a wider delegation, for instance from a trade association (36%), followed by having met with members of his team (24%). Only 1 in 8 have met with the Shadow Chancellor directly (12%) and 1 in 5 have had no engagement at all with Mr McDonnell (20%). This may suggest that, despite Mr McDonnell regularly telling the City that his ‘door is open’, he is more likely to engage with larger groups or delegations rather than regularly meeting directly with firms – or perhaps that the City is not yet fully taking the Shadow Chancellor up on his open door offer.

Cicero Group

Painting The City Red | 5

Labour’s agenda for Financial Services The business of government has been dominated by delivering Brexit since June 2016. While Britain’s departure from the European Union has undoubtedly posed political challenges for the Labour Party as well, the space afforded by being in opposition has meant that the party has been able to continue to devote considerable energy to developing its policy platform, free from the constraints imposed by office and actually having to deliver Brexit.

The 2017 Labour manifesto was already a radical blueprint for a very different type of government, especially as regards management of the economy and the relationship between government and the corporate sector. But far from leaving that plan for office in stasis, Labour has used the two years since to continue to flesh out and build on their programme, adding some major new policies and setting out more detail on others.

In speeches to City audiences, John McDonnell has been candid that there will be things in Labour’s manifesto they will not like, but insists there will be others that they do. It is fair to say that there is widespread nervousness about Labour’s plans on corporate taxes and renationalisation to name but two, but on some issues, such as infrastructure investment and skills, the sector may find his message more palatable.

In this section we map out the key themes of Labour’s policy development in respect of financial services and the wider corporate sector.

Sustainable Finance Labour is putting the ‘climate emergency’ at the heart of its entire economic prospectus. In a speech at UK Finance in June 2019, John McDonnell said it is his “overriding aim” as Shadow Chancellor to develop a policy programme that “will harness the full might of the Treasury in government to tackle climate change”. To demonstrate the seriousness of his intent, McDonnell wants to rewrite the Treasury’s Green Book so that decisions on public spending, taxation and regulation are evaluated on their environmental costs and benefits. This would be part of a wider reshaping of the Treasury’s remit, and emblematic of a new approach to governing.

Labour’s agenda for financial services fits squarely within this wider focus on creating a more environmentally sustainable economy. The party wants to harness both public and private sector finance away from investment into polluting assets and towards businesses and social enterprises that play their part in tackling climate change.

The party is mulling a proposal from Graham Turner of GFC Economics to broaden the remit of the Bank of England’s Financial Policy Committee (FPC) to specifically look at how the financial sector tackles the climate question, alongside a greater focus on productivity. The Shadow Chancellor has commissioned a review to look at the whole financial sector, and how and where it is causing or contributing to the problem of climate change. The party has also proposed legislating that companies listed in London contribute towards fixing the climate crisis, with the threat of delisting if they failed to do so.

“The party wants to harness both public and private sector finance away from investment into polluting assets and towards businesses and social enterprises that play their part in tackling climate change.”

All of this points to an interventionist approach, whereby regulation will seek to compel financial services firms to play their part. Cicero’s research suggests the City is comparatively more supportive of Labour’s plans in this area, and many financial services firms are already moving in this direction, for instance by divesting from fossil fuel assets. But the City should be prepared to have to go further and faster under a Labour Government.

Cicero Group

Painting The City Red | 6

Investment and Productivity In March 2019 John McDonnell said the British economy has suffered from a “chronic lack of investment” and that for too long finance and investment has “been solely in the hands of the big banks and the speculators”. The Shadow Chancellor was setting out Labour’s plans for “a new public banking ecosystem”, comprising a new £250bn National Investment Bank (NIB) which would support a network of regional development banks, as well as a communitybased Post Bank to provide basic banking services and act as an “on-lender” for the regional development banks.

The NIB and regional banks would seek to “fill existing gaps in lending by private banks”, providing patient, longterm finance to SMEs, infrastructure projects and R&D-intensive investments. In addition, RBS would be kept in public hands and be another ‘on-lender’ for the regional banks.

Labour argues that the proposal for a National Investment Bank is not an especially radical one, with John McDonnell remarking in 2018 that the UK is “if anything, fast becoming an outlier in not having one”. He cites the Asian Infrastructure Investment Bank and Germany’s KFW as examples. By arguing that the NIB, regional development banks and Post Bank would be filling gaps not currently being met by the private sector banks, Labour is positioning its plans not as a threat to the existing banks, but as complementary institutions which will create a more diverse banking sector.

“The priorities of this ‘new banking ecosystem’ would include investing in the green economy, a focus on ‘productive’ industries and rebalancing investment away from London and the South East.”

The priorities of this ‘new banking ecosystem’ would be aligned with the wider objectives of Labour’s economic policy, including investing in the green economy, a focus on ‘productive’ industries and rebalancing investment away from London and the South East. In this regard, the work of Graham Turner of GFC Economics has been particularly influential, notably his June 2018 report, ‘Financing Investment’. Among Turner’s recommendations are to establish a Strategic Investment Board and extending the working remit of the Bank of England to include productivity by setting a 3% annual productivity target. He also wants to move some of the Bank’s functions to Birmingham, establish Bank offices in Glasgow, Cardiff and Belfast and smaller regional offices in Newcastle and Plymouth.

It is not just the Bank that might see functions moving out of London. More recently, Labour has also signalled plans to break up the Treasury and move a “huge” part of it to the north of England. While the detail is not yet clear, McDonnell told the Manchester Evening News that “large amounts of that [£250bn] will go to the north, so therefore the best thing to do is to put the administrators in the north”.

The financial services industry should expect to see a regulatory approach which emphasises productivity and investment to a greater extent, and will also need to get used to government and regulators being spread over a more geographically diverse area. However, the UK financial services industry is itself spread throughout the UK, and there are likely to be opportunities for firms which can show how their regional footprint is supporting local economies.

Regulatory Reform Labour is expected to embrace a more interventionist approach to regulation across a range of sectors, including financial services. In 2017, the party pledged to put in place a “firm” ring-fence between investment and retail banking which they believe will provide greater protection to consumers (though it is unclear precisely how this will be tougher than the existing ring-fence). More recently John McDonnell has proposed a new Overseas Loan Transparency Act to establish a new compulsory register of overseas loans from UK financial institutions. We can expect such reforms to be typical of the approach of a Labour Government under Corbyn and McDonnell.

In 2018, the party commissioned Professor Prem Sikka to undertake a wide-ranging review of the regulatory Cicero Group

Painting The City Red | 7

landscape in the UK, with a particular focus on the financial sector, accounting, auditing, corporate governance and insolvency. Under Professor Sikka’s proposals, the Financial Conduct Authority (FCA) would be swept away, along with regulators that govern the water, energy and media industries and self-regulatory bodies covering law and accountancy, and replaced with a new ‘pyramid’ structure of regulators answerable to Parliament.

At the top of the pyramid would be a ‘Business Commission’, which would oversee compliance with business law and make sure enforcement action was taken as quickly as possible. “Sub-commissions”, including a companies commission and finance commission, would deal with more specific aspects such as corporate governance, accounting, auditing and insolvency, and sectors such as financial services. While this report has been endorsed

by John McDonnell, and submitted for consideration as part of the party’s policymaking process, it is not official Labour policy at this stage. However, it gives an indication of the type of radical regulatory reform that the party could be tempted to implement in office.

Taxation Labour’s tax plans are at the heart of the party’s ‘for the many, not the few’ narrative. The party is proposing a number of redistributive tax measures which would see the wealthiest and corporations pay more. The party is also exploring new forms of tax, including a new Land Value Tax to replace business rates and a “progressive property tax” to replace council tax, while wealth taxes could also be under consideration. In 2017 the party pledged to increase taxes on private medical insurance.

There is nervousness about many of these proposals in the financial services sector, most notably the planned Financial Transactions Tax (FTT) which the party proposes implementing by extending existing Stamp Duty Reserve Tax to cover a wider range of assets. When combined with planned increases in corporation tax to 26%, the top rate of income tax to 50% and the introduction of a new ‘excessive pay levy’ on companies with staff on high pay, there are fears the UK would become a less attractive place for financial services firms to do business. The party also plans a comprehensive package of measures aimed at ending the “social scourge” of tax avoidance and evasion.

Labour would argue its proposals on corporation tax, income tax and clamping down on avoidance and evasion are modest. On corporation tax for instance, an increase to 26% would put the level back where it was in 2011 – still lower than at any point under the Thatcher, Major or the New Labour Governments. The increase in the top rate of income tax from 45p back to 50p is still well below the punitive upper rate of 83% introduced by the Labour Government in 1974, and the 60% rate which remained in place throughout most of the Thatcher years. Meanwhile, pledging to clamp down on tax avoidance and evasion is hardly a commitment unique to the Labour Party, with all mainstream parties having made commitments in this regard in recent years.

Cicero’s research appears to confirm that the biggest single concern in the City is with the proposed FTT. However, introducing this tax is not likely to be straightforward. Analysis by Clifford Chance in 2017 said there were “significant flaws” in Labour’s planned design (based on expanding stamp duty) which could lead to “cascade effects” that could greatly increase the effective rate which could create a “strong incentive for funds, investors and traders to migrate from the UK”. Under the previous Labour leadership, the party supported the introduction of an FTT only on an international basis. If Chancellor McDonnell decides to go it alone, he will need to get the detail just right.

Ownership Under Jeremy Corbyn’s leadership, Labour has once again embraced the idea of publicly owned utilities. The party plans to immediately set up a new unit in the Treasury to begin the process of renationalisation and advise on issues such as compensation for shareholders. The party will also end the use of Private Finance Initiative (PFI) contracts in the public sector and look at bringing existing PFI contracts back ‘in-house’.

While political opponents have criticised Labour’s renationalisation plans as representing a ‘return to the 1970s’, there is much polling evidence to suggest that Labour may be in sync with the public on this issue. Professor Matthew Goodwin has noted that “between 53 and 65% of voters support the nationalisation or renationalisation of energy and water providers, rail networks and Royal Mail, although in some polls the figures are much higher”, and that, although support is highest among Labour voters, “Tories are usually not that far behind”.

Cicero Group

Painting The City Red | 8

This public support is welcome from the party’s perspective, but it does not mean the act of renationalising utilities would be simple. It will not be a straightforward case of the Government buying-up shares and taking a controlling stake overnight. In rail for example, they will need to wait until individual franchises come to an end. In energy, the party’s blueprint for nationalising the energy networks sets out a very different model of ownership, that combines the traditional baseline of public ownership with decentralisation and a move to a mutualised system rooted in the cooperative movement. Compensation will be awarded to shareholders at a rate dictated by Parliament, but not necessarily at market rates – factors such as pension fund deficits, “asset stripping” since privatisation and the state of repair of assets will be considered, and deductions made accordingly.

It is not just in the utilities space that Labour will be looking at models of ownership. One of the party’s most radical policies – the Inclusive Ownership Fund – would see all UK companies of 250 or more staff having to transfer a share of ownership to their workers. However, employee dividends would be capped, and the remainder would go to the Treasury. This policy is generating significant nervousness in the City and was specifically flagged up as a major concern by a number of respondents to Cicero’s survey. The sector will want to engage closely on the detail of how the policy is implemented, with the party recently stating that they continue “to consult widely” on the precise form of the policy, though it is believed that it would not apply to foreign-listed companies with UK subsidiaries. It is unclear whether private firms would be covered by the policy.

The idea for Inclusive Ownership Funds was first mooted by the New Economics Foundation in its July 2018 report, ‘Co-operatives Unleashed’. Two months later, John McDonnell announced the policy in his party conference speech.

This is a potent illustration of the influence of the left-leaning think tanks and academics that are developing policy ideas that resonate with the Labour leadership, but also that many of Labour’s plans for ownership are rooted in thinking about co-operative principles. The party wants to double the size of the co-operative sector in the UK, and the National Investment Bank and regional development banks would be tasked with boosting investment in cooperatives.

All of this points to a diverse set of corporate ownership structures under a Labour Government, but the recurring theme is clear: significantly greater public- and employee-held stakes. This will impact on City firms both directly and indirectly, and mark a substantial change in the corporate landscape.

Democratising the Workplace The Inclusive Ownership Fund is one way in which Labour plans to give employees a greater stake in the companies they work for, but it is by no means the only one. At last year’s party conference, Labour announced plans that would see firms having to reserve one third of seats on their boards for workers. This would apply to all UK firms with a workforce of 250 or more, whether public or private, with employees holding internal elections to choose their representatives. Those who stand would be required to be members of a trade union and the unions themselves are key supporters of this policy.

Labour wants to amend company law so that directors owe a duty not only to shareholders, but to employees, customers, the environment and the wider public. They would also amend the takeover regime to ensure that businesses identified as ‘systemically important’ have a clear plan in place to protect workers and pensioners when a company is taken over.

As part of efforts to curb corporate ‘excess’, Labour has proposed requiring firms which supply national or local government to move towards a 20:1 pay ratio between the highest and lowest paid, and introducing equal pay audits on large employers. To build on the work done to date on women on boards, Labour also pledges to implement the recommendations of the Parker Review to increase the ethnic diversity of the boards of Britain’s largest companies.

Cicero Group

“Labour points to examples such as Germany to show that the policy is a mainstream one, and can boost productivity and morale in companies.”

Painting The City Red | 9

Sir John Parker’s review was conducted in association with EY and Linklaters and already has significant support in the financial services sector. However, other elements of Labour’s proposed boardroom reforms will be more contentious, especially the election of workers to boards. Labour points to examples such as Germany to show that the policy is a mainstream one, and can boost productivity and morale in companies. They might also reasonably recall that Theresa May advocated the idea during the early stages of her leadership.

Labour’s agenda on corporate governance can perhaps best be characterised as ‘democratising’ the workplace. For City firms this would be a major adjustment and lead to a significantly different look and feel in the boardrooms of financial services firms.

Ageing Society Labour is grappling with policies to deal with the UK’s ageing society, most notably the looming crisis in social care funding and provision. Labour is looking to lay the foundations in their first term of office for a new National Care Service to sit alongside the NHS, something which has long been an ambition for the party. In 2010, Andy Burnham’s plans to this effect were dubbed a ‘death tax’ as they would have included a compulsory contribution to cover the additional costs. Since then Labour have attacked the cuts made to social care and wider local government budgets. The main concern with Labour’s plans will be with regards to funding. While John McDonnell has stated that Labour’s plans are fully costed, doubts remain that the party would be able to fund all of its commitments.

Their plans will include the implementation of a maximum cap on care costs, but set at a lower level than the £72,000 envisaged by the Coalition Government’s Care Act 2014. The insurance industry has been broadly supportive of the principle of a cap on care costs, which would allow the industry to develop products to help people meet their care needs up to the value of the cap. While Labour is clearly more attracted to state-based social care funding solutions, there may nevertheless be opportunities arising if Labour actually goes ahead with implementation of a cap on care costs.

On pensions, Labour has been relatively short of distinctive policy positions, but there is a broad direction of travel towards increasing protections for individuals. The party is in agreement with the Government on many aspects, including expanding auto-enrolment, creating a Pensions Dashboard, and introducing Collective Defined Contribution (CDC) pensions. However, we should expect Labour to favour intervention over increased freedoms when it comes to implementing future pension policy.

Labour is likely to take a more hardened approach on issues such as cost and transparency. They are committed to ending “rip-off hidden fees and charges” as well as enabling the development of “large efficient pensions funds, which will mean more cash for scheme members and lower costs for employers”. The party will also take steps to compensate the ‘WASPI’ women and is committed to maintaining the state pension ‘triple lock’ throughout the next Parliament.

And of course...Brexit Labour has been on a gradual journey towards a ‘softer’ Brexit position. From the 2017 manifesto position of respecting the outcome of the referendum, leaving the EU and ending free movement of people, the party is now supportive of a second referendum on any deal the Conservative Government puts forward, or no deal, and would support remaining in the EU. However, it remains less clear what the party’s position would be in government, with the possibility still open that the party could support leaving with a renegotiated deal.

The party has been clear that it would not countenance leaving without a deal, and is supportive of remaining in a customs union and maintaining a strong relationship with the Single Market. Depending on the circumstances at the time, a Labour Government could therefore look to renegotiate terms, especially of the political declaration on the future relationship – or, if Brexit has already occurred, to change Labour’s negotiating stance in the future trade talks.

The financial services sector would welcome Labour’s aversion to no deal and commitment to a close relationship with the Single Market. However, there does remain a high degree of uncertainty about what precisely Labour would seek in negotiations with Europe and how this would impact upon trade in services.

Cicero Group

Painting The City Red | 10

John McDonnell - What kind of Chancellor will he be?

John McDonnell has been the driving force behind much of the Corbyn project. From serving as Corbyn’s campaign manager in the 2015 leadership contest to doing much of the heavy lifting on policy development ever since Corbyn’s election, it is fair to say that McDonnell is by some margin the most important member of the Corbyn Shadow Cabinet. While stories have recently been circulating about a possible rift between the two men over Labour’s Brexit position and the handling of anti-Semitism, their relationship is built on a long-standing personal friendship and deeply-held shared political convictions.

McDonnell has proven himself to be a highly effective political operator, striking an accommodating tone with business whilst pushing a more radical message to the Labour Party membership. As such, it can sometimes appear that there are ‘two John McDonnells’: one a socialist firebrand, the other a ‘friendly bank manager’. The difference is largely one of presentation however, as the radical policies he espouses in both guises remain unchanged, but in front of an audience of City executives McDonnell is more likely to emphasise his willingness to engage on the detail and explore ‘alternative ways to achieve the same ends’. In office, the likelihood is that he would continue with this approach – having worked hard to cultivate a relationship with the City which is at least mutually respectful if not overly warm, there would be little value in chucking that out of the window the moment he gets the keys to Number 11.

If McDonnell becomes Chancellor, he has set his sights on nothing less than a root-and-branch overhaul of the UK’s economic, financial and industrial architecture, from re-nationalisation to re-writing the Treasury Green Book. He would be Corbyn’s most important lieutenant and exert significant influence across Whitehall. While he speaks of relocating large parts of the Treasury outside of London, and devolving economic decision making to the regions, Number 11 would undoubtedly remain a key centre of political power. While Corbyn and McDonnell are about as far removed from the ‘New Labour’ project as it is possible to be, ironically their partnership as PM and Chancellor might not be entirely dissimilar to the Blair-Brown model, where much of the domestic agenda is run out of the Treasury while Number 10 focuses more on international issues.

McDonnell has spent a political lifetime promoting a programme of economic radicalism and in his own words, working to “overthrow” capitalism. It is debateable whether this is still his real objective were he to become Chancellor. However, he would certainly seek the boldest reform of the economic and financial structures of the UK ever attempted.

The Wider Treasury Team Peter Dowd MP, Shadow Chief Secretary to the Treasury Dowd is a loyalist on the Labour left who would oversee departmental spending reviews and have a key role in Labour’s plans to end austerity.

Jonathan Reynolds MP, Shadow City Minister Reynolds comes from the more ‘moderate’ wing of the party and is Labour’s chief emissary to the financial services sector. He is a reassuring figure in the City and as such would play an important role in selling a Labour Government’s reforms to financial services leaders.

Anneliese Dodds MP, Shadow Treasury Minister Dodds leads on tax policy in Labour’s Treasury team. She is well respected in the business community, having first become known during her time as an MEP. Her grasp of policy detail (she is a former public policy academic) will be vital as she works on contentious issues like implementing an FTT.

Cicero Group

Painting The City Red | 11

Clive Lewis MP, Shadow Treasury Minister Formerly seen as a Corbyn loyalist, Lewis resigned from the Shadow Cabinet in 2017 to vote against triggering Article 50. He rejoined the frontbench in 2018 with a specific remit to lead the Shadow Treasury team’s work on sustainable economics.

Lyn Brown MP, Shadow Treasury Minister A respected figure on Labour’s ‘soft left’, Brown joined the Shadow Treasury team in 2018 with responsibility for special projects especially around social inclusion and social mobility.

Lord Davies of Oldham, Lord Davidson of Glen Clova & Lord Tunnicliffe Lords Davies, Davidson & Tunnicliffe would be responsible for Treasury business in the House of Lords under a Labour Government.

Key Advisers •

Madeleine Williams – Chief of Staff

•

Sebastian Bracchitta Corbyn – Political Adviser

•

Mary Partington – Political Adviser

•

Rory MacQueen – Political Adviser

•

Andrew Whitaker – Head of Strategic Communications

Key Organisations and Influencers •

GFC Economics/Graham Turner

•

New Economics Foundation

•

Centre for Labour and Social Studies (CLASS)

•

Common Wealth

•

Progressive Economy Forum

•

Institute for Public Policy Research (IPPR)

•

Professor Prem Sikka

•

Lord Kerslake

Get in touch If you would like to speak to the Cicero team about this report, or how we can help support your organisation and its public affairs objectives in 2019, please contact a member of the team below: Tom Frackowiak Managing Director - UK Public Affairs Tom.Frackowiak@cicero-group.com +44 (0)20 7297 5966

Cicero Group

Simon Fitzpatrick Account Director Simon.Fitzpatrick@cicero-group.com +44 (0)20 7947 5314

Painting The City Red | 12