That was the message I delivered on Irish television last night.
You can see it here.
The message is a blunt one: Ireland chose to not regulate. It is now living with the consequences of that. They are very, very uncomfortable.
I do blame the bankers. I do blame the accountants. But I blame the politicians too. The culture has to change. They created it.
Will it though?
It is the only way forward for what is, in effect, a bankrupt state. But how long will it take to appreciate that?
Gordon Brown has not changed his spots. Re-reading his article in the Observer on Sunday makes that clear. He said:
But as we design this new regulatory system, we have to be clear as a nation about what we expect from our banks and clear, too, about how people, who depend every day of their lives upon banks, expect these vital institutions to be run. For, distant as the relationship between banker and client has become, the restoration of trust, the most precious asset of all, to the heart of that relationship must now underpin all that we do.
This should not be at the cost of Britain hosting big international banks. There is no room for parochialism or protectionism in our model of the future. Global financial flows and liquid capital markets have brought massive benefits to our economy since the dawn of global trade centuries ago. We are not evacuating, but rather entrenching, our place right at the heart of global commerce, finance and trade.
You can’t have it both ways Gordon: we can’t have the bankrupt (literally) model of opaque banking you continue to espouse here, with its dependence on tax havens for its shadier deals and a relationship of trust with these bankers. It is not possible. It just won’t happen.
The City as we’ve known it is going to have to die to achieve reform. And a very different model of banking is going to have to emerge.
But as I’ve said time and again, that can’t be done by putting the very broken Humpty Dumpty of banking back on the wall again. Despite it being Treasury policy to do so all their horses and all their men (and women) will not achieve that again.
So why not move on, like the rest of us Gordon?
The Irish Times has a feature today in which it is said:
In some cultures failing to pay one’s taxes is regarded as a disgrace, but not so in ours, where ‘tax fugitives’ are feted as heroes
This is a feature of the moral decline in Ireland.
It’s become endemic. Bono typifies it. As I have already noted he has said:
Ireland’s prosperity had been achieved through tax innovation and it would be churlish to criticise U2 for being innovative in relation to their tax affairs when that’s what people were encouraged to do and that’s what made the country prosperous.
It’s curious too that the Irish Times article was in the context of philanthropy. I note J P McManus was Philanthropist of the Year in Ireland in 2007. He is an Irish tax exile.
No wonder Ireland is a mess.
In the context of which – anyone who is watching Irish television tonight might like to note I’ll be on Primetime at 9.35pm
This was in yesterday’s Jersey Evening Post:
Behind the scenes, Island political and business leaders accept that Jersey has never before come under such close scrutiny as a finance centre. Treasury Minister Philip Ozouf said that the Island welcomed the opportunity to show how well regulated it was.
Haven’t they got the message yet? Citigroup claimed to be well regulated. So did HBOS, Anglo-Irish bank, UBS, Lehman, and many more. They’ve all failed. The regulation was inappropriate. It generated vast amounts of paper, contained no risk and delivered no benefit. The regulation was looking in the wrong direction at the wrong problem. Probably deliberately so.
And the same is completely true of the regulation that has applied to Jersey. So what then that Jersey complied with the rules? They were the wrong rules, asking the wrong questions and getting the wrong answers.
The world has changed. Saying you’re playing by the old rules is a certain recipe for getting left behind in the new scenario that is being created. Get real Jersey: transform your act, change ahead of the requirement to do so or you and your like will be rightly swept aside. It’s a blunt choice. But you’ve got to make it.
Polly Toynbee has written:
Kick-starting the housing market is the urgent priority, isn’t it?
So the government put money into preventing repossessions, and yesterday Northern Rock was reborn as a lender able to offer mortgages of up to 90%.
And as she then goes on to argue, this is not the case. Precisely because housing has been so lightly taxed in the UK it has become an asset subject to speculation and price bubbles. We all lose as a result.
There are several solutions. Polly mentions some, I offer these as well:
1) Reduce Inheritance Tax thresholds: this creates appropriate progressiveness in taxation and charges properties to tax at the precise point when it is absolutely right to do so: when the owner no longer has a use for them. And yes, a modification or two to allow for co-habiting sisters and off-spring who have been genuine carers will be needed. But this reform is essential now – and let’s ignore everyone who says this is double and triple taxation. That’s rubbish, as I show here. And, if we are to avoid capital gains tax charge on increase in property prices during a person’s lifetime a totally realistic level of tax paid on death is the only option. An appropriate inheritance tax is the price of labour mobility which a capital gains tax during life would constrain.
2) Speculation in housing must be taxed as income – buy to let is fine: I am in favour of rented property being available. Buy to speculate is not. So short term property gains on rented property must be taxed as income.
3) Restrict tax relief on buy to let property. The 100% tax offset fuelled the property boom. Interest caps – for an individual in total and against the value of individual properties have to be introduced.
4) We have to look at land value taxation. I know this is a contentious issue. I know it will give rise to comment on this blog. But it is inappropriate to ignore the issue, even for pensioners and others who do not have the cash flow to make payment. For them a deferred charge against the value of the property can be agreed.
5) Housing must be considered to be a communal asset again. It is not just private property. Bond financed, environmentally sound, family friendly property has to be built to meet the massive demand for decent housing that exists in this country.
We cannot afford the duck this issue. When parents all over the country wonder how their children under the age of 25 may ever live independently it is obvious that house prices remain completely inappropriately high. When tax exemption of property is a major reason for this it is abundantly clear that now is the moment to address this issue. We will never get a better chance.
Associated Press has reported:
Heads of government and finance ministers from Europe’s largest economies joined German Chancellor Angela Merkel in Berlin to lay the groundwork for a common European position on economic reforms before an April 2 summit of the Group of 20 nations in London.
It said:
Other key points agreed to [on] Sunday included adopting a “sanctions mechanism” to penalize tax havens and urging banks to keep larger reserves of capital.
“A new system of regulation without sanctions would not have any meaning,” said Sarkozy.
He said European countries should jointly draw up a list of tax havens, as well as sanctions they might face for continuing reckless financial activity.
As Forbes has noted – getting Obama to deliver his part is now key.
But have no doubt that this means we’re rolling. Not fast enough yet. But we’re rolling. As the EU Observer notes, I’m not alone in thinking this:
Nicolas Sarkozy, the president of France, said that European leaders were agreed in wanting to see an overhaul of the system. It was important that there were sanctions, he said. Recalling that at the previous G20 summit in Washington in November it had been hard to get any mention of tax havens, he applauded the EU’s agreement on a crackdown and on the need for greater regulation of hedge funds and of rewards in the banking sector.
These are my links for February 22nd through February 23rd:
Rubbish – they will – or Switzerland will be forced out of business, lock, stock and barrel
“We do not envisage, as some have advocated, a rigid divide in future between “narrow banking” – retail and corporate despoit taking – and investment banking and trading conducted at an international level.”
So, no change there then. The masters will continue to hold the UK and the global economy to ransom.
Even a man of Stanford's preposterous bluster would struggle to explain how enabling tax dodging has anything to do with giving a toss about other people. He and his ilk are fauxlanthropists. If governments are brave enough, the real philanthropy should begin now.
Which is what I've been saying since 2003….
In itself that is significant
The Economic Times of India(a pretty reliable source) has reported:
While international pressure is mounting on offshore banks to relax secrecy rules, the Vatican, the seat of the Catholic Church, wants all offshore tax havens to be closed. The official statement from the Vatican, called an encyclical, is expected to ask for a closure of such tax havens. The encyclical is scheduled to be released on March 18 by Pope Benedict XVI.
The Catholic Church periodically issues the encyclical on various issues it is concerned with. It had planned to come out with an encyclical on tax havens last year, but postponed the date following a decision to do a thorough research on global economics and the reasons that have led to the current slowdown.
The office of the Archbishop of Mumbai said: “We expect the encyclical to be published on March 18. However, a formal release will happen on May 1, on the International Workers’ Day.” A policy paper issued last December by the Vatican, blamed the current financial crisis on offshore centres such as Channel Islands, which are basically British dependencies.
The paper, in a scathing attack on “unhealthy and inequitable financial practices,” also pointed to the alarming figure of global deficit caused by offshore banking. The size of global deficit is estimated to be around $255 billion, almost three times the aid given to developing countries globally. Closure of these offshore banks, according to the Pope, should be the first step out of the current global economic crisis.
It is also reliably learnt that the encyclical sees the tax havens as the main conduit for transferring money from poverty-stricken nations to the rich world and the consequent impoverishment of the people in developing and under-developed countries.
The Vatican looks at the huge amounts siphoned off to these offshore banks as the money that the governments in developing countries could have utilised for helping the poor. The Church’s concern on offshore banking also coincides with the global awareness of fiscal dangers caused by tax havens.
Much of the above analysis is based on my work for and with the Tax Justice Network or that of Raymond Baker at Global Financial Integrity.
The morality of the argument is abundantly clear to all with eyes to see.
One way of looking at it…with apologies to whoever owns the original copyright:
The financial crisis explained in simple terms………………………..
Heidi is the proprietor of a bar in Berlin . In order to increase sales, she decides to allow her loyal customers – most of whom are unemployed alcoholics – to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around and as a result increasing numbers of customers flood into Heidi’s bar.
Taking advantage of her customers’ freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.
A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi’s borrowing limit.
He sees no reason for undue concern since he has the debts of the alcoholics as collateral.
At the bank’s corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.
One day, although the prices are still climbing, a risk manager (subsequently of course fired due his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by
the drinkers at Heidi’s bar.However they cannot pay back the debts.
Heidi cannot fulfill her loan obligations and claims bankruptcy.
DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %.
The suppliers of Heidi’s bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.
The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.
The funds required for this purpose are obtained by a tax levied on the non-drinkers.
Finally an explanation I understand…
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