The Telegraph has reported (but using language almost identical to all other papers) that:
Lord Turner, chairman of the Financial Services Authority, has backed a tax on banks to curb excessive bonuses, saying the City has grown too big and parts of it are "socially useless."
He said that the City had grown "beyond a reasonable size", accounting for too much of British output and taking away too many of the country's brightest graduates.
It should be cut down to size through new taxes if necessary, he said during a round-table discussion organised by Prospect magazine.
"I think some of it is socially useless activity," he said, referring to the complex financial instruments that have largely been blamed for triggering the biggest global financial crisis in decades.
Areas that had grown too big included fixed income securities, derivatives, trading and hedging, and possibly also asset management and share trading. Lord Turner said he would be in favour of imposing City-specific taxes, if necessary.
"If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit," he said.
If higher capital requirements did not eliminate "excessive activity and profits", options could include taxes on financial transactions, so-called Tobin taxes, after the economist James Tobin.
The economist suggested a small tax on foreign exchange transactions in the 1970s to discourage speculative trading.
No such taxes are under consideration, aides to the Chancellor, Alistair Darling, have reportedly said.
Lord Turner said the FSA would push banks to defer more bonuses and to pay more in shares, not cash. There will remain four or five global financial centres, and it is almost certain that one will be London," he said.
What can I add? he’s reflecting what I’ve long said.
I worked on the major proposal for a Tobin tax for the UK for Stamp Out Poverty and have met the Treasury with them.
I have proposed higher taxes on bonuses to stamp out excess.
I have proposed additional taxes on bank profits.
I am one of those proposing a High Pay Commission.
Lord Turner is buying in — at least to a Tobin Tax. And commentators are wrong to say this will require international cooperation — Stamp Out Poverty show it could be operated on sterling alone. The deal could be done.
NB For more on Tobin Taxes read Larry Elliott in today’s Guardian.
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[…] let’s start with the tax items I noted earlier today and then move on to the list the Task Force on Financial Integrity and Economic Development […]
But Richard, the people carrying out these activities are vital wealth producers, paying loads of tax, if they’re subject to this kind of unfair treatmeant they’ll leave the UK and without them how would the UK have an economy, blah blah blah, etc etc etc….or at least, that’s what these people and their supporters keep telling us.
“If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit,”
Where did this guy study his economics?
If you reduce the size of the sector (ie presumably less competition), the banks will be able to sc*ew us even more. Surely what we need is a bigger (and more competitive) banking sector where these excesses will get competed away.
Anyway, who is he (or Richard, or me or anyone else) to say what is ‘socially useful’? It is such a loaded but meaningless expression. What it really means is ‘anything the political elites like’. No thanks!
“fixed income securities, derivatives, trading and hedging, and possibly also asset management and share trading.”
Eh? My brain hurts.
I don’t understand what half of those mean let alone how they work. And I’m a qualified accountant with a Cambridge degree.
I think that humankind has made the whole banking / tax / money thing far too complicated for its own good. I wish it were possible to sweep away the whole thing and start again. Cut the Gordian knot.
M
We live in a totally bonkers time. But if social utility is to be the judge of anything surely we should be arresting the CEOs of mining and “natural resources/exploitation” companies right now.