Thursday, 27 August 2009

"The City" - 'socially useless' and needs be 'taxed more'

In a recent post I pointed out the need to tax wealth manipulation far more (e.g. many investment banking transactions), and ideally in a similar way to 'gambling' ... and it's interesting to now hear Lord Turner, chairman of the Financial Services Authority (i.e. the FSA - the UK's financial watchdog), say he also backs a new tax on banks (e.g. speculative transactions) ... as a means to prevent excess bonus payments in the industry. It was also even more profound to hear Lord Turner say that much of the activities in the City of London are "socially useless"!

However Lord Turner's comments do not set out a new policy, because as a government spokesman has been quick to point out, "tax policy" is a matter for the Chancellor! Lord Turner's comments do however put far more pressure on the Chancellor, Gordon Brown, and the Government, to show their true colours now ... and to show us whether all their 'talk' to date of fixing the problems are 'real', or all 'rhetoric' and 'spin' ...

To date it has been mostly rhetoric and spin, as they have handed bankers an open cheque (i.e. taxpayers' money on a plate), and given they created much of the UK banking crisis themselves (e.g. by allowing the re-integration of investment banking with commercial banking here in the UK) ... I think it's unlikely they'll admit their mistakes or fundamentally change tax policy here anytime soon, despite the fact that it's desperately needed ... they'll probably simply rely on fear and confusion created by others (e.g. groups like the CBI, the Voice of Banks, for instance) who will predictably speak out about the 'damaging effects' of such a move.

What Lord Turner has successfully done is to raise the 'stakes' and to highlight where 'responsibility' actually lies ...

Referred to on Stephanomics recent blog (on QE and banking). Take a look at Paul Mason's blog too - he's Newsnight's economics editor, and unlike Stephanie, he took time to blog about this specific subject himself.