Will Hutton has an article in the Observer under the title:
When will banks learn that dodgy tax practices actually cost them dear?
It's OK as it goes, although, as has always been the case with Will, never once acknowledging the role of civil society in first drawing attention to this issue. But then it gets to its last paragraph, where Wills says:
And while the new Labour leadership is calling for the investigation [into banking practices] to be reinstated, it is too invested in destroying or undermining capitalism to be a plausible voice in constructive reform. The government can do what it wants. Without a feasible, intellectually coherent plan for a different approach — or the political heft to back it — expect nothing to change.
It has to be said that this is nonsense of a Mandelosnian order.
Even if I am not currently doing a lot of talking to the Labour leadership it is widely acknowledged ( including by them) that I've influenced their thinking, and I've also known both Jeremy Corbyn and, in particular, John McDonnell for more than a decade. Why is that? It is not because I have been a member of the Labour Party: as I have, repeatedly, made clear, that is not the case. Nor is it because we have agreed on everything, although we have without doubt done so on many aspects of economic policy. Rather it it is for three very good reasons.
Firstly, when no one else saw the importance of tax campaigning the likes of John McDonnell, Alan Simpson, the late Michael Meacher, Kelvin Hopkins and Jeremy Corbyn did. They realised the importance of this issue in creating division in society, and that it had to be tackled both nationally and internationally, and when no one else would listen to the early campaigners for tax justice (of whom I was one) they were a reliable, persistent and willing audience who were happy to raise these issues in the House of Commons. We have a lot to thank them for.
Second, I never did, and never have believed that they did so to undermine capitalism, and they certainly did not do so to destroy it. Instead, what they pointed out, as I and others pointed out, was that capitalism was destroying itself and that unless the state stepped in to create the necessary level playing field on which all businesses could fairly compete subject to appropriate and proper regulation, transparency and accountability, and subject to consistently applied taxation laws, then there was no prospect of the capitalist part of the mixed economy in which we should all partake delivering what we expected of it.
Third, what the likes of John McDonnell realised then, and do I still believe realise, is that there is no prospect of building the foundations of a future prosperous society in this country unless the rules by which markets operate are changed. But, I stress, I have never heard any one of the so-called left-wing MPs around the Corbyn leadership say at any time in the last decade that they would wish to destroy privet business, or remove its to trade, or stop the existence of quoted companies (certain exceptions being noted, where it is obvious to almost anyone that a nationalised industry could clearly undertake the task better than any private enterprise could, such as railways) and I am, candidly, never expecting to hear them say such a thing. That's because the rule changes they want aren't about undermining or destroying capitalism; if anything they are about saving it from itself.
Will Hutton knows capitalism does not work in its current form.
He knows that it delivers inequality.
And he knows that it is far from being in any suitable form to deliver the benefits that it is, overall, I think capable of supplying.
What this means is that anyone who believes that we must face the future with a strong, vibrant, mixed economy where the state is the foundation and guarantor of well-being (as in practice it has proved to be, time, after time, after time) and where the private sector is allowed to build on that foundation to help some people achieve their own objectives whilst meeting the needs of other in ways the state can't and never will do (just as on other occasions the private sector cannot and never will do what the state can achieve) has to believe that fundamental reform of the way in which we regulate markets must be a priority.
So, banking has to be brought under control.
And multinational businesses have to be made accountable using, for example, country-by-country reporting of the exact type that Will Hutton refers to in his article without ever acknowledging that this was created by the tax justice movement, with the early support of the MPs who he now appears to despise, even though he is more than willing to reap the rewards of their efforts.
In addition, the Bank of England will need to have its function and goals reviewed.
Whilst it is without doubt fundamental to this achievement that HMRC be radically reformed, be brought under proper management control, have established governance principles built into it, be accountable for the tax gap, and be required to close it.
If Will Hutton thinks that these things are undermining capitalism then I have to say he is quite simply wrong. In fact, I would go so far as to say that unless these reforms take place those who think that genuinely free markets have a role in society are sorely mistaken because they will never get anywhere near seeing such markets exist without them.
So what does Will Hutton want? A functioning economy as a consequence of the reforms that I've noted here, promoted by people who always had fairness, equality, transparency, accountability and the belief in the partnership between the state and business at the core of their political philosophies? Or a continuation of the abuse of markets which is what we are seeing at present and which, regrettably, New Labour had no response to, and still does not?
Time to stop the groundless comments I suggest and make some real decisions, I suggest.
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The deposit protection limit of the Financial Services Compensation Scheme is currently set at 100k Euro by a supra-national body. Most people will never benefit from the security of that level of bank deposit, so here it is government reinforcing inequality by compulsion.
If the free market set the retail deposit protection limit without government involvement it would undoubtedly be much lower. And sales of punting coats to big despositors would plummet.
Very interesting point I am currently thinking about.
One the one hand one sees the Swiss popular request for a referendum to remove all money creation through credit from the private banks by controlling all credit through the central bank (brrrrr this feels sovietly cold) and on the other hand the hammering on the banking sector as we see on this blog so often, not totally for the wrong reasons.
In this regard, I may considered as an extreme liberal, but I believe that one of the important and rarely discussed aspects of the corruption of the banking system is exactly what Baxter Basics says. Remove the state guarantees for retail deposits, as in my eyes this is nothing but a massive subsidy to the banking sector, through the payment by the state of a massive implicit insurance premium.
If you then also find a natural way to increase the number of banks and hence limit their size, you will improve the internal credit values in the system. Banks will have to act much more cautiously to attract deposits, if these are at real risk.
Of course, I do understand that this may be seen as having social consequences, i.e. that small depositors take actual risk as opposed to have supposedly guaranteed deposits, but in a broken system and also that the price of credit would undoubtedly increase, but that is maybe not a bad thing…
I am a bit of a homeopath. I do not like hard core remedies and especially not politically imposed ones. So let’s get politics and banks out of each others arms and cut the subsidy. Or at least acknowledge the perversion of this system, which for me is at the core of the rot!
The social cost is way beyond acceptable
But that says banking has to be strictly controlled as a result
And subject to Glass Steagall style provisions
“Remove the state guarantees for retail deposits, as in my eyes this is nothing but a massive subsidy to the banking sector, …”
But it’s not a state subsidy – the compensation scheme is funded by a levy on … the banks”
Massively under paid for benefit
“privet business” = hedge funds? (I’ll get me coat)
Capitalism now is now what it were when I were a lad. And then that wasn’t what it were when grannie were a girl living along the road from a factory owned by a neighbour of Karl Marx, what ever happened to him? Moreover it is in a period of rapid change arising from the immense and all encompassing technical changes going on literally under our noses. Sadly governments and very much the UK one are a decade or two behind it all. There is going to be trouble at the mill….
Come on get it right “trouble at mill” !!
I suspect you mean trouble at t’mill.
The banking system is organised in a way which is closer to a state managed system than capitalism. A free market capitalistic system would not have deposit guarantees, fiat money, central banks, interest rate policy, inflation targeting, QE and bail outs. Perhaps this is part of the problem? Capitalism allows profit and loss with loss being a powerful regulator. Our system doesn’t allow losses hence the aforementioned list to protect the banking system.
The problem is regulation has been captured by the bankers
Deliberately aided by politicians keen for that to happen
So use the European and other rules that outlaw subsidies. I think this is the crux more than a lot of the left/right politicking! (I know this is in the short term very likely to be understood or accepted…)
This and accounting transparency, which you, Richard, promote, are non-political battles, much better to fight than the left/right politics! They are neutral, objective and quantifiable.
Whether 40/45/50% or as some people may dream of 60% is the right tax rate is a pub discussion.
The so-called free market system is what existed during the free banking era of the 19th and early 20th Centuries. Financial panics and depressions were effectively regular occurrences due to the unstable nature of capitalism, so a strong role for stabilization by the state is an unavoidable necessity.
Agreed wholeheartedly
And the state has to be big enough to supply that
35% is not big enough
Richard-do you mean 35% of GDP ? I thought Government spending was about 47% of GDP?
Unless you are referring to the overall Government stake in banking? Not sure what that is at present.
Te aim is to make it 35%
Which were the depressions prior to central banking?
And what’s wrong with a bit of panic? If the bank has lost your money panic is a good response. It keeps people careful and bankets honest.
We’ve had a central bank since 1694
And no run for 160 years prior to Northern Rock
Do you know anything of the real world?
James,
Not that I should bother to write this, but a financial panic is what occurred in 2007-2008 and the result was massive loss of output, employment and incomes. There is no economic theory on the planet that holds losing these things is a desirable outcome.
Continuing my previous comment because I accidentally submitted it before finishing, compound the 2007-2008 financial panic with a lack of state involvement to provide stability. Banks cease trusting each other and refuse to accept deposits, meaning one can no longer cash their paycheck. Nor can they spend because reserves become an item of instant scarcity. Commerce grinds to a halt and the economic losses are multiplied by at least a factor of two. During the free banking era contractions of 25% were not uncommon.
Will Hutton fails to mention the form of capitalist arbitrage which has probably caused most harm to most people who vote in this country and therefore those who could change the political direction – and that is labour arbitrage.
How can anyone possible support an economic system that actively goes out of its way to destroy jobs in one country, export them to another or import lower cost workers to do the work of its citizens here instead. It is utter madness and yet to question it is considered radical or extreme!
The nonsensical arguments made to support it just demonstrate the fact too many people’s brains have been turned into porridge by the lack of a loud and coherent alternative public narrative.
To reform capitalism through regulation will take far more than reforming fiscal, regulatory and accounting arbitrage – all of which I agree are important. But if it was at all possible to regulate away all of the worst excesses and negative externalities what would that new system look like?
Certainly not free market capitalism, which almost every businessman I have ever known has never wanted to see because the only way to create a decent level of profit and have your business survive for more than a few years is to dominate or control a market and avoid as much competition as possible.
There needs to be a fundamental re-think by some of these so called economic or political experts as to what on earth they are talking about. The real world is nothing like place too many people of influence or power think it is. Most ordinary people know that, they just hope their politicians know better. Sadly very few do!
Another worrying intervention from Will Hutton, and certainly not in keeping with the Will Hutton of “The State We’re In”
Alas, I’m beginning to fear he’s past it, and entering his dotage, when he can clearly no longer than see what’s going on under his nose. For he has shown NO indication of having understood the transformation of perceptions both partly caused by, and partly resulting in, Corbyn’s winning the Labour Party leadeship. The Britain prior to that Leadership campaign was, quite literally, a different country.
Hutton is now but a relic of a bygone age. He pinned his colours to the stakeholder concept which, to be fair, New Labour flirted with for a brief period before they opted for the provider/customer/ beggar the workers model. What your tax campaign has ably demonstrated is that without the kind of strict and enforceable regulation that only nation states (or possibly larger blocs like the EU) can provide, post- 1980 capitalism will wreck the planet, not pay its taxes to support the infrastructure on which it depends, enslave or pauperise its workforce and promote and protect a class of super rich rentiers and corporate executives. There’s only one group of stakeholders now, Will, and they sit inside their financial stockade protected by their neocon friends in government and the media.
Richard
“The problem is regulation has been captured by the bankers
Deliberately aided by politicians keen for that to happen”
Which is why an American commentator has suggested that we are not living under Capitalism any longer. He contends that Capitalism has already ended and been superseded by ‘Bankism’. Which is a good reply to the accusation that Labour is trying to undermine Capitalism, when in fact it has already been undermined by the banks. It is self evident that the banking sector has more power than the political sector in pretty much every Western Economy. So it would probably be truer to say that Labour are merely trying to restore Fair Capitalism.
The modus operandi of capitalism will inevitable change over time as developments in technology and financial speculation evolve. But the core drivers of the system are still the same as far as I can see.
Capitalism is an economic system based on private ownership of the means of production and the creation of goods and services for profit.
I think ‘Bankism’ has probably been the case most of the time EXCEPT for the Wars (when command economy comes into force) and the so-called ‘Golden Age of Capitalism 1945-75 which was, I think, a consequence of the WAR and the fear of Socialism.
The post war Bretton Woods consensus and subsequent post 1971 global financialisation is explained well by Yanis Varoufakis in his book The Global Minotaur which is well worth a read. It explains the build up to 2008 and gives a good insight as to why the Eurozone is still in such trouble.
http://www.a-puntes.net/arc/VAROUFAKIS-the-global-minotaur.pdf
“The government can do what it wants. Without a feasible, intellectually coherent plan for a different approach — or the political heft to back it — expect nothing to change”.
I think the key part is “— or the political heft to back it —”
Have you read the Strange Non-Death of Neoliberalism” by Prof Crouch ?
The system is bent, and that’s exactly how they like it.
The book “After the Great Complacence” (Ewald Engelen et al) covers the 2007/2008 banking debacle (which is the word the authors use to characterise the events then). It is a somewhat academic work (7 authors) but nails most of the problems with banks & what is needed to solve the “banking problem”. Chapter 8…. “the only credible response is not a list of technical fixes but an intellectual project for making the politics of finace explict which could lead towards a political plan for putting banking & finance under democratic control”. So far nothing seems to have happened in the UK in this direction & certainly this is nothing to do with undermining capitalism and everything to do with making the banking sector work for society – not the other way around..
On a related note: the book is a good read with chapter titles such as
“Alternative Investment” or Nomadic War Machine?
““the only credible response is not a list of technical fixes but an intellectual project for making the politics of finace explict which could lead towards a political plan for putting banking & finance under democratic control”.
As we have been discussing MMT which gre out of Abba Lerner’s Functional Finance goes a long way towards that.
David “The Strange Non-Death of Neoliberalism” by Prof Crouch of Warwick University Haven’t read the book but, thank you for the name, there is 40 minutes on you tube where he speaks about lots of interesting stuff on markets and their working – or not, which I can certainly recommend. Link below:
https://www.youtube.com/watch?v=R3oZaDFXeIc
It’s a good book
Another good justification for breaking up the large multinational corporations as well as the global financial institutions which finance them. These increasingly dominant, unaccountable, undemocratic organisations are now the real forces of power in most western “democracies” and almost totally in control of many emerging countries.
If it is considered appropriate to leave them in private hands then they should at least be broken up to restrict their ability to dominate a market or sector or country. Alternatively convert them into true “publically owned” institutions for the benefit of everyone they come into contact with.
I can never understand why states provide retail depositor insurance directly without charging an appropriate insurance premium . An alternative approach would be for a state to merely set the level of insurance required, say, 100k euros and banks could buy the insurance wherever they could get the best rate bearing in mind their individual solvency record and risks. This approach works for insuring cars and would appear to be a fair way to protect retail investors.
Lin Homer to be a Dame -surely that should have read a pantomime Dame? !!!