Ask anyone in Edinburgh, and the chances are they know someone who works in financial services. Standard Life, Scottish Widows, RBS – major employers that run through the city like a stick of rock.
Nearly 200,000 people in Scotland work in or for financial services. It’s centred on Edinburgh, but official figures show the sector is in decline.
The reputation of financial services couldn’t be lower. It’s hard to argue for a sector where some players have repeatedly abused their privileged position. But Edinburgh needs powerful voices to drive real change and speak up for the future of this city.
Although we’ve seen collapsing banks and a litany of abuses, often by very highly paid executives, it’s not new. President Roosevelt, at the depth of the great depression in 1933, used his inauguration speech to denounce bankers as “unscrupulous money changers, who stand indicted in the court of public opinion, rejected by the hearts and minds of men”. Tough words – but his tough action led to radical reforms which saw the country rebuilt and lift millions out of poverty.
Some say finance is just for the rich and is socially useless. But many of us have a pension which we expect to be managed well, home insurance, life insurance, or even a savings product with our bank.
There’s a lot more that financial services should do support people on low incomes and help fight social exclusion. For generations, Edinburgh enjoyed a justified reputation for ethical, innovative and socially useful finance. Unlike the Bank of England, the Bank of Scotland was established to meet the needs of local households and merchants. The first-ever life insurance contracts were born in this city. With history like that, Edinburgh can still have a great future.
Some want to compete with the City of London by luring opaque casino banking to Edinburgh. But this is a model rotten with conflicts of interests. Instead, I believe Scotland can rebuild its reputation for socially useful finance. The rise of Brazil, China, India and Indonesia means that soon, there will be another three billion citizens looking to invest, insure and save. As they prosper, Edinburgh must stand ready to lead the world again.
Modern finance needs infrastructure backed by the state: regulation, laws, public accounting standards, a skilled workforce, technology, exchanges, central banks and – of course – public backing in times of panic. Edinburgh has all these things.
To really secure Edinburgh’s future and create jobs, we need three ingredients. First, we need the return of ethics. Edinburgh is big enough to compete at the highest level, but small enough to put in place its own code of conduct, enforced by its financial community. I want to see a tight code of conduct, perhaps a Hippocratic Oath for Edinburgh marking out the Scottish financial community as different.
Second, we need better training for people looking for work in the industry. This is a global business, and our skills must keep pace. I want to see a world-beating Edinburgh finance and business school, allowing people to retrain part-way through their career. People who aspire to lead firms should not have to travel elsewhere to keep their skills up.
Third, we need a stronger role for the state. That means a tough but fair regulatory framework and lasting resolution to the constitutional question. Senior Bank of England figures have called for tougher limits on risky banking. Labour will back financial regulation that works for people and supports socially useful, ethical finance – and Edinburgh needs a strong voice in that.
Financial firms are far easier to move than manufacturing plants. We know that capital was already “flighty” before the referendum. After the Canadian referendum, financial firms – including the Bank of Montreal – left Quebec. It is essential to stop that here. Only Labour offers unequivocal backing for the Smith Commission and a UK-wide constitutional convention to establish a workable future for both sides of the Border.
Dr Angus Armstrong is a candidate for the Labour Party nomination for Edinburgh South West