FT: How the City make up its own rules

September 18, 2015 6:35 pm

How the City of London really does make up its own rules

Izabella Kaminska

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The new shadow chancellor is not a fan of this autonomous jurisdiction, says Izabella Kaminska

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A policy allowing conversions to housing has contributed to a shortage of offices in the country’s biggest business districts, according to research

John McDonnell wants to ‘teach bankers a thing or two’ Financial Times, September 14
 

I’ve heard John McDonnell, the new shadow chancellor, doesn’t much like the City of London.

He once listed his hobby in Who’s Who as “generally fomenting the overthrow of capitalism” and is known for wanting to abolish the City of London Corporation. Safe to say, he’s not a big fan of bankers.

But what does the City of London Corporation have to do with bankers?
 

The City of London Corporation, centred at Guildhall, is seen as the historic home of free enterprise and thus the banking community, which finances it as well.

Is it really a Corporation in the sense that Tesco and BP are corporations?
 
The City of London is considered to be sui generis, which is Latin for “in a class by itself”.

And what does that mean?
 
That it is one of the oldest self-governing municipal democracies in the world, with roots going back as far as medieval times when it was set up as a commune. Its right to exist predates that of parliament and even the Magna Carta of 1215, which was the charter of rights between King John and the barons, makes special reference to its “ancient liberties” and how they extend to all freemen of the realm. The status has afforded the jurisdiction a Lord Mayor since the days of William the Conqueror. The mayor’s responsibility has always been to ensure the Crown maintains its side of the longstanding bargain.

Is this why the Queen has to go through an elaborate ceremony before she is allowed in?
 
According to the corporation: “The right of the City to run its own affairs was gradually won as concessions were gained from the Crown.” So while the corporation recognises the Queen’s authority, the relationship is complex and engulfed in ritual.

So does that mean the City of London is a state within
a state?
 
The City of London Corporation prefers to view itself as an autonomous jurisdiction that defends the rights of freemen and occasionally extends that protectorship to “freemen” beyond its borders with a ceremony known as the “freedom of the city”.

And what exactly are “freemen”?
 
Freemen are those considered not to be the property of a feudal lord but who enjoy privileges such as the right to earn money and own land. This has meant that the freemen of the City have uniquely benefited from the right to trade as merchants or members of a guild or livery.

So while the rest of us were serfs of feudal lords, the freemen of the city were allowed to be entrepreneurs?
 
Indeed. Furthermore, the City’s close connection with trade and business, and its general championing of free enterprise, has over the ages allowed it to accumulate great riches and power. So much so, that over time its citizenship even began to employ an effective system of civic militias, which meant the Crown could never subordinate the City of London to its rule, especially with respect to taxes.

So they control their own police force?
 

Documents from the London Metropolitan Archives suggest the City of London has had the right to control its own police force since time immemorial. Anciently the militia was known as The Night Watch, Today it is better known as the City of London Police, and remains quite distinct from the rest of the London Metropolitan Police system, operated and paid for by the City of London’s own coffers and tax system.

So what exactly is Mr McDonnell’s beef with the corporation?
 
Some say that because the corporation is entitled to special tax and legal privileges, this renders it an offshore island inside Britain and a tax haven in its own right, and gives those who own businesses within its borders a distinct upper hand over everyone else.

And the connection to banking in particular?
 
Banks benefit from being able to shelter themselves and their clearing practices within the City’s famous square mile perimeter, which gives them certain economic advantages over banks and corporations that don’t have offices within the jurisdiction.

Have there been attempts to abolish the City of London Corporation before?
 
The City survived several Victorian attempts at municipal reform. For most of the 20th century the Labour party had a pledge in its manifesto to abolish the corporation. Arguably, it was only under New Labour that the historically acrimonious relationship between the City and the leftwing of British politics was smoothed over by granting the Bank of England independence over monetary policy.

izabella.kaminska@ft.com

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