WHY DO THEY hate me? So goes the lament of well-meaning political leaders through the ages — and for Gordon Brown such resentful puzzlement seems even more justified. At his breakfast yesterday with grandees from the City of London, this phrase must surely have flashed through the Chancellor’s mind.

The people arrayed before him — some of the richest and most powerful bankers, investment managers, lawyers and accountants in the world — had more reason than anybody else in Britain for gratitude to Mr Brown.

During his ten-year tenure their personal wealth has multiplied beyond the dreams of avarice. The after-tax incomes for the top 1 per cent of the British population, which consists largely of financial professionals, have grown faster than ever before in modern history. They have grown far richer under Labour than they did under Margaret Thatcher and their gains have been even more spectacular in comparison with the modest progress of Labour’s traditional supporters in the industrial working class. The banks, investment companies, accountancy and law firms they manage have prospered as never before. London has regained its dominance in global finance. Most importantly, finance is now universally recognised as the driving force of Britain’s prosperity.

Why then does the City so distrust and, in my experience, even hate Mr Brown? The usual reasons I hear in the City are either dishonest or useless. Dishonest are the standard accusations heard from the financial media and Tory spokesmen — Mr Brown’s “£5 billion tax raid” has destroyed pensions; intrusive regulation by the Financial Services Authority is making it more difficult for the City to compete; Britain’s 30 per cent corporation tax is driving business to Dublin where corporation tax is just 12.5 per cent. The useless reasons are the ones that are so general as to have little meaning — that he has not done enough to cut taxes, reduce regulation and defend Britain from the encroachment of EU rules.

Financiers just keep repeating the dishonest reasons, even though they know them to be false. Anybody with a thorough understanding of pensions knows that Mr Brown’s “tax raid” was not the root cause of the industry’s demise. Occupational pensions and life assurance were destroyed by foolish court judgments and well-meaning but misconceived regulations under the Thatcher and Major governments. The “tax raid” was actually supported by most business leaders and tax experts, since it paid for a three-percentage-point reduction in corporation taxes and simplified the corporate tax system in exactly the way the Tory tax panel is expected to recommend in its report to David Cameron today.

The FSA is now widely recognised as the most rational and least intrusive financial regulator in the world. As for tax competition with Ireland, this could well drive some institutions to relocate their legal domiciles to Dublin; but that need make no more difference to the City’s prosperity and international status than every hedge fund in London being incorporated in Curaçao, Nassau or Cayman.

What, then, are the real issues Mr Brown must address if he wants to win the trust of the financial community and to ensure that the City’s golden geese continue to fill the Exchequer with golden eggs? The answer is to narrow down the generalised demands on taxes and regulation from City lobbyists and focus on specific objectives that can get results at modest cost. On taxes Mr Brown must rein in the over-zealous revenue officials who have in recent Budgets inserted draconian anti-avoidance measures that neither the Chancellor nor his senior Treasury officials appeared to understand. The result has been huge indignation in the financial community, followed by embarrassing retreats by the Chancellor and a legacy of permanent mistrust. What frightens the City today is not the level of taxes but what a leading lawyer described in the Financial Times yesterday as the “ambiguity and rumour surrounding future changes”.

If Mr Brown wants to stop businesses leaving Britain for tax reasons, he does not need to compete with Ireland. All he has to do is allow them to take advantage of whatever freedom they enjoy in current tax laws. In order to do this, he should state explicitly that tax avoidance is a respectable aspect of business planning and make a cast-iron commitment never again to attempt retrospective legislation against tax arrangements.

On regulation Mr Brown could be equally effective at low cost. He could save what is left of the occupational pensions industry by instructing the pensions regulator to return to rational actuarial methods in calculating pensions deficits. He could limit the epidemic of employment litigation, which is more of a threat to the City than any FSA regulation, by setting limits on discrimination awards and shifting more of the burden of costs on to aggrieved employees. Such a list could go on and on, but at this crucial political juncture even one or two symbolic gestures could have a big effect on the financial sector’s confidence in him.

The fact is that a large part of the anti-Brown emotion in the City can be explained by pure tribalism — the gut feeling that a Scottish Presbyterian ascetic must hate the City’s get-rich-quick mentality and its conspicuous consumption. Mr Brown will therefore try to sabotage the City once he is liberated from the moderating Mr Blair.

This purely emotional fear of Mr Brown is not to be sniffed at. Now that ideological differences between the parties have almost disappeared, tribalism looks like returning as a decisive factor in British politics. As things stand today, this tribalism will benefit the Tories since, other things being equal, people naturally prefer to identify with the winners in life. But could Mr Brown change this?

Could he overcome his natural aversion to flashy wealth and rub shoulders with the City tribe? It’s hard to imagine, but stranger things have happened. So leave Mr Cameron to his bike, Gordon — what you need is red braces and a Porsche.

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