Economics viewpoint

Why Reeves may regret bigging up the banks

- Heather Stewart

Davos in Switzerland, where the global elite will gather this week

Backslapping bankers will be thick on the ground in the Swiss ski resort of Davos this week as Rachel Reeves flies in to mix with the global elite. But she might be wise to treat the finance bros with a certain froideur.

That has not been Labour's approach thus far: Reeves spared the banks from a windfall tax in her 26 November budget, and the UK's regulators have just loosened capital rules for the first time since the financial crisis.

Back in the summer, bank share prices ticked down after the Labour-leaning Institute for Public Policy Research recommended an £8bn levy on the windfall profits made as a result of quantitative easing.

Insiders at other thinktanks said at the time it was made clear to them by the Treasury that publishing such forthright policy proposals was not a welcome contribution to the debate. When it came to budget day, the banks were left untouched.

JP Morgan responded with the announcement of a £3bn HQ in Canary Wharf, east London, with its chief executive, Jamie Dimon, saying the “UK government's priority of economic growth has been a critical factor in helping us make this decision”.