Bank clampdown may tarnish London's lure

LONDON: Two decades ago, the Observer newspaper begged architects and thinkers to rescue a London it said was rat infested, shunned by anyone not trapped in a job, and "on the skids". One credit-crisis later, the "Cool Britannia" moniker claimed by Tony Blair in 1997 still applies.

In the face of Britain's deepest economic slump since World War II, theatre visits have jumped 27 percent. Some 49 of London's 6,000 restaurants now hold Michelin stars, offering 42 different types of cuisine, compared with 35 in New York and 18 in Paris.

Actor Kevin Spacey has been directing and starring in sold-out shows at the Old Vic Theatre for six years, and his fellow Hollywood star Kate Hudson says she'd love to tread the city's boards.

The British capital's status as the favored playground of the global elite is under threat from Prime Minister Gordon Brown's push to squeeze banking bonuses and raise taxes to slim a swollen deficit. London's defenders say it can hold its own.

"London is possibly the most fun city in the world, certainly the one which has the most international appeal," said Jim O'Neill, 52, chief global economist at Goldman Sachs Group Inc in London. Still, he says, "I'm quite shocked by what they've done on tax."

London's image as Europe's most cosmopolitan city contrasts with the malaise of 20 years ago. Rioters torched part of Trafalgar Square in 1990 after then-Prime Minister Margaret Thatcher tried to push through a new municipal tax. Artist Damien Hirst, whose shark-in-formaldehyde installation defined the so-called Britart movement, was laboring on building sites. Much of east London, home to Canary Wharf's cluster of financial-firm headquarters and the 2012 Olympics, was still struggling to recover from World War II bombing raids.

'Pretty grim'

"Twenty years ago, when I started writing about restaurants, it was pretty grim," said Giles Coren, 40, a British food critic and novelist. "It took a while for London to get out of the 1950s. Now, it's the best place for a good meal and the best place to live."

Some London residents nevertheless worry that London's pull will be dulled by the government's clampdown on bankers to appease voters' anger in the aftermath of the credit crisis, with measures including an increase in the top income tax rate to 50 percent from 40 percent.

Brown's drive "really is an absurdity", said Michel Roux Jr, head chef at the two-Michelin starred restaurant Le Gavroche, in London's exclusive Mayfair district. "2010 is going to be very difficult for a lot of restaurants."

Rolling Stones

Chancellor of the Exchequer Alistair Darling this month imposed a tax on bank bonuses exceeding 25,000 pounds ($39,854), prompting some economists to draw parallels with the 1974 pledge of another Labour Party finance minister, Denis Healey, to tax the rich "until the pips squeak".

Under that Labour government, the income tax rate rose to 83 percent and the levy on unearned income climbed to 15 percent, according to the Institute of Fiscal Studies, prompting Mick Jagger and the rest of the Rolling Stones to move to France briefly. While Darling's proposals pale by comparison with Healey's era, they still provoked a round of warnings about an exodus of the city's highest earners.

Tullett Prebon Plc, the inter-dealer broker led by Terry Smith, said Dec 14 it will help its staff to leave the city. Earlier in 2009, the government's pledge to increase the top tax rate led British artist Tracey Emin to consider a move to France, the London-based Sunday Times said Oct 4.

Living in Dubai

For some Britons living abroad, there aren't enough incentives to return. Will Lawrie, head of Modern & Contemporary Middle Eastern Art at Christie's in Dubai, does not regret his decision to leave London three years ago.

"Living in Dubai does have its advantages," said Lawrie, 31. "Driving to work in an air-conditioned car instead of riding a stuffy tube; expatriates from different parts of the world who actually speak to each other; no income tax which puts more money in your pocket; restaurants where you might be able to get a booking before the next decade."

In November, a survey of more than 3,000 expatriates by HSBC Holdings Plc rated London as one of the worst locations in terms of lifestyle due to poor quality of accommodation and commuting times. Canada was rated the best place to start afresh, followed by Australia and Thailand. The only countries less attractive than Britain were India, Russia and Qatar, the survey showed.

Other expat destinations, while offering tax advantages, may not be able to compete with the diversity of London, one third of whose residents were born outside the UK.

"The whole tax thing is not a threat to London," said Coren. "I lived in Paris for a year. It's pretty and pointless. New York is depressing. There's no greenery, there's no children. London has it all."

Bloomberg News

(China Daily 12/28/2009 page11)