I debated bankers bonuses with Mike Warburton of Grant Thornton yesterday on Radio 2. As Howard reed — a co-author of mine on the recent Compass tax report noted:
I doubt there will be many sympathisers with Mike Warburton’s position outside the banking sector itself. He was effectively arguing that the UK should tax bankers as lightly as possible when times are good and then give them as much money as possible to bail them out when times are bad. One doesn’t need to be an economic genius to work out that this creates an incentive for bankers to gamble as recklessly as possible in the knowledge that the taxpayer will always bail them out. It’s a crazy approach - and I think the UK public understands that at a fundamental level.
I am sure Howard is right. But this morning we have my old friend Bill Dodwell of Deloittes telling the Guardian:
We've had calls from bankers asking about ... what action they might take under the Human Rights Act. There's never been a precedent [for a tax targeted on one group].
I think government lawyers will be working incredibly hard as to whether this [tax] is feasible at all
You can be sure that Bill will be doing his best to make sure it is not. So will Jon Terry at PWC, who said:
They will find ways around it
Since the report continues by noting:
Terry at PwC said the definition of "bonus" and "banker" would be crucial
I think we can safely assume that Terry actually means “we will find ways round it”.
This is the madness of the big firms of accountants. I use the word mad advisedly. If mad means “being out of touch with reality”, and I think it does, then I can genuinely say these comments represent the madness of these firms.
If they continue this way accountants are next for public opprobrium. And quite rightly so. Advertising intent to circumvent the law is, in my opinion, profoundly unethical behaviour if that is, indeed, what they are doing.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Let’s have the big 4 accountants admit to the free money and account for it, otherwise as we know those adept at helping up costs to reduce taxation will continue to have a more-or-less free hand. Up to 2006 the big 4 banks got away with an estimated EXTRA £30 billion (Bromsgrove activists’ Group estimate more like £80 billion) per year and only declared profits up to £30-40 billion. Yet last year Barclays declared “in difficult times” 20% profit – down from 40% – double the aim for most companies of 10% in the best of times.
ACCA the accountants’ group quote the bank employees receiving 26 times the reward per employee of the next best sector. This trickles down throughout the finance sector. As you said in your piece and on the radio – the game is up and the accountants should shoulder their ethical responsibility. Here is a summary of what I informally circulated at the Max Fry Conference on World Economy and Finance in May 2009.
FROM THE EXISTING HIGH-PRESSURE WORLD of finance, it would surely be desirable to have a mechanism for automatic diversion of part of commercially-created money if it could be for anti-inflationary, long-term climate protection needs .
The credit creation system offers the perfect opportunity, now that instability issues are being discussed. So a credit creation charge might be a timely way to achieve a stabilising flow of revenue from the top-heavy, most-profitable world of high finance. We would then need a mechanism for efficient distribution, suggested below – fairly funding projects directly.
In Australia the GST is at 10%, Canada 5%. In the UK VAT has been brought down to 15%. But none of these countries have a mechanism that allocates ring-fenced funds against climate change. Meanwhile congestion caused by cars has declined little since the credit crunch. They are still using up the limited fossil fuels that China and India will soon be even more rapidly eating into. And sea levels will more rapidly rise.
So energy transition and climate change adaptation measures could both be massively assisted by the simple means suggested below. Part of it has already got muted praise from Whitehall and by the Bank of England. Earlier STEER (ETI) was supported as an option by the Earth Policy Institute in the USA – a lead author in Earth from the Air (!) photos that brought matters sharply into focus. For example the decline in value of trade received (from increased volumes) for those bottom 50 countries with weak currencies (50% drop in value 1990-2000). This started me in my search for solutions to currency value problems that could attend to climate.
We have embarked on a book that must be out soon, hopefully a short TV series to follow. In it we are describing how currency value has been at the heart of a series of global problems: from global terrorism to inadequate protection of the agricultural and other land turning to desert, to our own starvation of funds that should have automatically gone towards infrastructure costs (otherwise increasing taxation) that would protect the roads from congestion.
The ordinary man, the business man or woman and the teenager struggling to make sense of the world will read this book! So should government, policymakers and academics! It offers the mechanism by which the Green New Deal can be helped to reality instead of another forgotten report. In it we will show that a simple diversion (charging at the base rate of interest for any new money) amounts to a lot less than half of currently-created credit money that has been and will be a source of extreme profit to banks. This can be used to assist the introduction of an ETI a fundamental alteration to the means of distribution. Each year would add a similar increment — stabilising after all new money charged for.
By making the money flow automatically and ADJUSTABLY to investments, rather than consumption (direct to projects and with an equal return to projects in producer nations) rather than through government or bureaucracy, we may have the magic bullet partially described above, to help everyone including banks, insurers, re-insurers and EMPLOYERS/EES.
Briefly put, the VAT would be brought further down to 10% and the EET or ETI brought in alongside at 10%. The offset needed to protect the vulnerable from the effects of that tax (amounting to 2.5% net increase in UK) would be diverted from banking as mentioned in the first few lines above to help simplify the myriad of taxes: by sending the base rate on any new money to the public purse via the Central Bank. The new diversion would help the implementation of a ‘dream agreement’ for Copenhagen and allow fast-tracking of Building Make-overs — energy enveloping and energy detailing – in the UK.
Contact Ian.Greenwood +44 (0)121 449 0278 @STEERglobal.org
PS A Professor of governance at the conference said of the document “good”