In 2008 Labour put in place a package of measures that kept bankers in business -- to secure people's savings, ensure cash machines functioned, and to stop the subsequent recession turning into a depression.
This of course caused the public sector net debt to increase, which all the major parties are committed to address. The coalition government tells us it wants to make the City pay its fair share. So why doesn't it?
In opposition George Osborne railed against cash bonuses paid by the bailed-out banks. Nick Clegg campaigned on "total transparency" of high pay and an end to cash bonuses. Once in government they said they would take "action to tackle unacceptable bank bonuses" and introduce a levy on banks to ensure "a fair contribution in respect to the potential risks they pose". Business secretary Vince Cable went so far as to slam excessive bonuses given to "spivs and gamblers" at his party's conference.
Yet the government's record shows an abject failure to walk the walk. Take the bank levy, its flagship instrument for making the City pay its share. As a concept it had great potential to meet its purpose but now, it seems, it is considered a step too far. So last month we learned the banks will not have to pay tax on their first £20bn of taxable liabilities -- they get a tax break before the tax has even been introduced. This month we read the astonishing news that the chancellor wants to further reduce the level of the tax because, at £3.9bn, he fears it will raise too much money -- too much at a time when we face £81bn of public spending cuts to pay for the effects of a financial crisis caused by the bankers.
Moreover, this week the government said it was also rowing back on the disclosure of bankers' pay. Osborne said he would not implement his original plans for the disclosure of all earnings in the sector above £1m, proposals which Cable has described as "key" to ensuring that banks "behave more responsibly on pay and bonuses". How, after all, can we keep a track on reckless remuneration encouraging risky behaviour if we don't know its true extent?
There is an alternative. The government could reflect London's position as a leading financial centre by pioneering high standards of transparency and responsibility. In his review on the disclosure of bank pay, Sir David Walker seems to have forgotten saying that "an exemplary leadership stance by the UK in this respect is the most effective way of achieving progress". He was absolutely right, and the government should implement his remuneration scheme with immediate effect. The government should also heed the IMF's call to raise the bank levy to £6bn.
We are told that these measures will lead to a flight of business and talent abroad; but is this not the same tired old mantra, wheeled out every time banking reform is on the table? It was used when the Labour government levied a "supertax" on bonuses last year. No such exodus occurred -- the number of bankers leaving for low-tax Switzerland, for instance, actually fell by 7% last year.
They also tell us international agreement is sorely needed before such measures are implemented. If it's multilateral agreement the government wants, it should show some international leadership. Think back to April 2009: as the world stood on the brink of economic disaster, Gordon Brown convened the G20 in London to forge a rescue plan for the global economy. The City tells us Britain's voice on these issues has since diminished. Speaking before the Treasury select committee this month, the chair of the City of London's international regulatory strategy group was clear: the UK is not taking an adequate lead in the G20 on these matters.
So next month, when bonus figures start being published and the City bankers' champagne flows, remember this: it doesn't have to be this way.