Finbarr Bermingham examines the underlying structure of one of the world's most powerful financial centres
The City of London is rarely far from the headlines – indeed, it would be fascinating to learn whether the total column inches it generates annually exceeds the 1.2 square miles covered by the City itself. Our fascination stretches beyond its history and the financial hub it’s become into its centuries’ old governance structure, which has barely evolved since the Middle Ages and which is more complex and independent than that of any other part of Britain.
The City sits outside of the parliamentary constituency system, but is represented in Westminster by the Remembrancer – an unelected official whose position dates back to the reign of Elizabeth I and who sits behind the Speaker in the House of Commons. Numerous governments have tried in vain to bring the governance of the City in line with the rest of the country, but it remains a semi-autonomous part of Britain, whose devolved powers include the right to have its own police force and the ability to set business rates.
The City is governed by the City of London Corporation, an organisation that exists to “promote the City as the world’s leading financial and business centre”, as well as providing the amenities that other local councils provide. The decision making body of the corporation is called the Court of Common Council, which is comprised of four strata: the Lord Mayor (who serves a one-year term), two sheriffs (also elected annually), 25 aldermen (who stand for a maximum of six years) and councillors (who serve for four years).
One of the main points of difference between the City of London Corporation and, say, Manchester City Council, is the brand of democracy it adheres to. In order to hold any of the roles within the corporation, a candidate must be a freeman of the City, an honour which can only be bestowed by those already in office. The Lord Mayor and sheriffs are elected solely by the liverymen: representatives of the City’s 108 livery companies, all of whom are already freemen.Formerly known as guilds and trade associations of the City, livery companies are private, independent enterprises within the City that engage in a range of profit-making activities and have substantial property holdings in the Square Mile).. “Civilians” do, however, play a role in electing councillors, but in only four of the City 25 wards may its 10,500 residents cast a vote. The votes in the other 21 wards go to businesses in the area, in a system of degressive proportionality. In other words, the bigger the company, the more votes they get. A company with less than ten employees gets a single vote, whereas a large corporate with over 3,500 employees is given 79 (the decision on which employees are allowed to vote is taken by the company itself).
Businesses, then, have by far the strongest hand when it comes to City elections. Only a businessman may vote for or become Lord Mayor, and they also decide on who sits on the council. The City has been widely criticised as being a “closed shop”, an “old boys’ club”, a “plutocracy” and beholden to the businesses within it, and commentators including writer and social campaigner George Monbiot and financial journalist and author Nicholas Shaxson have written scathingly and extensively on what they see as its “crony capitalism”. The Corporation, however, says the altered electoral system is necessary due to its “unique” makeup – nowhere else in the country do workers outnumber residents so significantly.
The City Fund is the body charged with managing the City’s assets and expenditure, as well as generating income through business rates and rents (the corporation owns about 20 per cent of the property within the City’s limits). Because of the unusually high ratio of businesses to citizens in the Square Mile, the City is allowed to set its own business rates. Whereas most councils calculate and collect these before returning them to a central pool (at which stage they are redistributed in the form of government grants), the City is allowed to retain a proportion before returning the remainder.
Other sources of funding for the City include the proceeds of council tax, government grants, and City’s Cash, a pool of earnings gleaned from 800 years’ of investing. The corporation recently informed Shaxson that the City’s Cash’s “total holdings are around £1 billion” and that the total assets of the City of London Corporation are approximately £3 billion. Shaxson’s calculations however, estimate the figure to be closer to “£10 billion”. To put this in perspective, Birmingham City Council’s net assets amount to £1.8 billion
So just what does the City do with all this cash? Like any other council, the City must provide local government services to its residents (housing, refuse collection, education, and so on). It also pays for the upkeep of its vast portfolio of real estate assets which include the Guildhall and the Barbican. It also owns over 10,000 acres of open space, much of which (like Epping Forest, Highgate Wood and Hampstead Heath) lies outside the City itself. Through its charitable arm the City Bridge Trust, the City of London Corporation owns and maintains London Bridge, Tower Bridge, Southwark Bridge, Blackfriars Bridge and the Millennium Bridge.
Furthermore, the City covers the cost of civil receptions. Quite often, a visiting head of state will be received at the Guildhall before they even meet the Queen. When the Queen herself enters the City boundaries, an archaic ceremony takes place, in which she’s greeted by a red cord at Temple Bar, manned by City of London Police officers, the Lord Mayor and some of his underlings, who grant her access. On its website, the City of London explains that it has gradually gained concessions from the Crown “to run its own affairs, saying: “From medieval to Stuart times the City was the major source of financial loans to monarchs, who sought funds to support their policies at home and abroad.” That a part of the UK has had so much power bestowed upon it from the monarchy – and remains so secretive about how it works – has raised more than a few eyebrows, and allegations of everything from nepotism to Freemasonry. The corporation declined to comment on any of the content within this article, adding to the shroud of mystery that cloaks it. The whispering is set to continue! In our next issue – Part 3: the City’s culture.