Member Article

City Talks: the monument and youth

Emerging into the bright Spring light of an early Monday morning at Monument tube station, one is reminded of the story behind the station name and the tower or “monument” a few feet away at the junction of Monument Street and Fish Street Hill.

The Monument commemorates the Great Fire of London in 1666. At 202 feet high it stands and equal distance away from the source of the fire in Pudding Lane. The Great Fire of London was started in a baker’s shop. James Boswell in his 1791 book, “The Life of Samuel Johnson” noted that Dr Johnson used the baker’s oven to have a pie cooked for Sunday dinner, as no bread was baked on a Sunday. This “moonlighting” by bakers during Saturday nights was the spark which ignited the Great Fire.

From this early time the link between bread and the City of London continues to be strong. With the proposed “Pasty” tax this link is to the fore. The technical issue is that typically food is zero rated for VAT save where it is served warm.

Whether or not food is “warm” when served depends on the temperature of the food as compared with the ambient temperature. A pasty or pie served warm in summer not being considered “warm” as compared with the surrounding temperature. The tax raising potential of VAT on warm fresh food could impact the City in at least two ways. First, if insufficient tax is raised the knock-on effect will be an increase in the national debt and a call upon investors to fund bigger gilt issuance. Second, inflationary fears arising from an increase in food prices.

So that’s the bad news for the City.

However, the good news for banks and old people is the result of a study which found that those banks with younger board members had an increased propensity to take risks. A five year reduction in the average age of directors increases the ratio of risk weighted assets by 2.66 times. Conversely the report identified that where directors had a Phd degree the trend reversed.

Therefore a good day for those with second degrees wanting to become senior bankers.

This was posted in Bdaily's Members' News section by Tim Stocks .