Erikka Askeland: A clear message to government - and it's Diamond-tipped

WHAT big industry is it possible to be proud of these days? Only a few years ago, in Edinburgh, chests would puff about banks and oil. Suffice to say, this no longer holds true.

• Barclays has made its feelings very clear to the Chancellor Picture: Getty Images

Banks, well, let's not rehash that old saga, but the prospect that bankers will continue to suffer raised eyebrows in polite company and worse in less polite company for years to come is a sure bet. And while climate change risk has intensified the whiff of sulphur emitted from the oil industry, the Gulf of Mexico spill - not to mention the role oil played in the Iraq war - has blackened its reputation still further.

Yet Bob Diamond, the anointed head of Barclays Bank, is still proud of himself. So much so that he might be baffled by claims his appointment to the top job at Barclays is like giving "two fingers" to the government as it decides whether or not to cleave retail banks from so-called "casino" banks. But replacing the bowler-hatted chief executive John Varley with the baseball-capped Diamond is, if not a rude gesture, then a strong signal of intent.

Barclays Capital is, after all, Diamond's baby. When he joined the reliably dull high street banking stalwart in 1997 to run its obscure investment bank, BZW, it was seen as a bit of a coup to have lured such a Wall Street heavyweight to London. But the American banker proved his mettle by turning Barclays Capital (BarCap) into one of the biggest investment banks in the world. He got paid for it too, having amassed an estimated 100 million personal fortune for his work. But he also gained an epithet as "the unacceptable face of banking" from no less than Lord Mandelson, when it turned out he made 60m just at the time that bankers bonuses were the dernier cri of moral turpitude.

Yet Diamond proved as hard and polished as his name and told journalists out for his blood that, rather than hound him about bonuses, they should be "immensely proud" of the fact that they had the number one bond bank in the world on this side of the pond.

And it is this that you can be sure the Chancellor will be thinking deeply about when the Independent Commission on Banking reports next September, which will set out in black and white the UK's approach to banking regulation. Already Osborne is distancing himself from a transaction Tobin tax, but there are strong arguments for putting depositors' safety first in Glass-Steagal-style legislation creating narrow banks. But Osborne is painfully aware that going it alone in enforcing strict measures on banks in the UK is economically dangerous, and amounts to whipping ourselves for past sins while rival economies - the US and China - take the advantage as we remain on our knees.

Yet threats that strict banking rules will surely drive out the money makers is like the boy who cried "wolf" - except in the case of Barclays. Diamond has a British passport but he is, by his own admittance, "very, very American". If forced to split Barclays from BarCap, it would be dead simple for Diamond to leave the boring retail bank here - sell it to Branson! - and take the part that makes the bulk of the bank's earnings somewhere friendlier.

That both Diamond and Barclays chairman Marcus Agius insist that the new head of the bank is "not about a new strategy", the choice is clear. By putting Diamond at the head of Barclays, the bank has made its move and now the government must decide how tough it will be in response.

Frankly, the only thing keeping the coalition from hugging the rich but wayward City to its breast and crying "all is forgiven" is the still-angry taxpayer. And perhaps Vince Cable. But in order for cuddlier relations between legislators and the City to recommence, it would require the UK voter to rekindle its pride in being a global centre for financial services and embracing Diamond's "unacceptable" way of doing business.

Pride of place goes to, well, we're not sure now

BUT it is not as if the banks themselves need our approval. The situation of highly paid bankers brings to mind the response once given by a speculator to the question "how do you sleep at night?", which was: "In a bigger bed, in a bigger house and with a more attractive woman than you do."

In the case of financial services, this could be extended to relocating the bed in New York, Shanghai or New Delhi where they turn a blind eye to that sort of thing.

What sticks in the craw of the average moralist is it is the craven opportunist who creates wealth. That is the nature of competition which, like the poet once said about nature, is red in tooth and claw.

It may be easier to be proud of, say, renewable energy but in Scotland at least this doesn't yet provide significant employment or profits.

Instead we have what no longer seems palatable. There's BP, which if it can't pay for the clean up in the Gulf of Mexico, threatens to take a major chunk of British pension funds with it. And there's Bob Diamond who pockets his 6m paycheck and says we should thank him for it. It is up to us to decide if we can stomach it.