On not understanding Tories

Donna

"If you believe in free markets, you should have no problem with the government separating retail banking from speculative banking"

Government interference is not a free market...

Fergus Pickering

I'm a Tory. I think bankers should be hanged, drawn and quartered. You with me there, Nick?

arnoldo87

Nick,

The people who generally inhabit these blogs are not the sort who weigh up an argument on both sides before deciding what view to take.

They absolutely know that Labour were solely responsible for the economic mess, that 13 years of Labour rule resulted in absolutely no improvement in any facet of our national life, that Tony Blair was an out and out liar, and that socialism is the same as Communism and as bad as Nazism.

They don't even want Cameron, preferring instead the Tebbitt brand of Conservatism.

So please don't expect any sort of balanced, rational response from the usual suspects.

Hugh

I think I can help you with your immediate bewilderment: Hancock's statement that taxes on banks aren't falling now is not really undermined by the corporation tax paid by Barclays in 2009, when the Tories weren't in power.

Victor Southern

The clue is in the dates Mr. Cohen.
"Barclays paid out just £113m in corporation tax in 2009, despite making a pre-tax profit of £11.6bn."

Columnists should try to avoid ridicule by thinking before they write.

Bob

Arnoldo87 thank you for your assessment. Are you aware that your statement presumes that you have perfect knowledge? Isn't that a common characteristic of the the three statist ideologies you name?
Incidently I began my adult life on the left and my journey has been one of constant disillusion with politics. Indeed my reading of Nick Cohen's excellent "What's left" played no small part in it. However in spite of what politicians say or do and the constant economic and social turmoil they produce, I have over forty years noticed one marvellously contradictory fact, living standards across the board have gone on rising.

Sam Davidson

This government has nothing to do with Tories, or indeed with conservatism; it is an economically right-wing, socially liberal morass with no connection to it's grass-roots members, or indeed to Tory backbenchers. It is a joke, and one should not confuse Cameron and co. with Tories or conservatism. Kay?

cuffleyburgers

As has been pointed out by Tim Worstall the low tax bill is simply a result of previous losses being brought forward.

Sounds reasonable enough to me.

The problem is not people no paying enough tax, it is the government spunking hundreds of billions up the wall on stupid stuff, total loss of control of public sector salaries - I am far more concerned about the news of the 500000 pound payout to a minor council popinjay than about barclays tax bill because that si the real mess that labour's stupidity and cynicism created.

Is there no limit to the idiocies of you lefties?

I'm going to have some lunch.

teledu

Who was in power in 2009 Nick?

Ian S.

I totally agree that the banks should not have been bailed out and that their rescue totally contradicts the foundation of capitalism. There can be no organisations 'too big to fail.' I would welcome some informed articles about what would have happened if the taxpayers had not been forced to rescue these spivs and conmen.

Erica Blair

'As has been pointed out by Tim Worstall the low tax bill is simply a result of previous losses being brought forward.'

Previous losses which would have been much greater (and current profits which would have been non-existent) without the bailout financed by our taxes.

As for Donna, she clearly believes that there cannot be a truly free market unless there is no government and no laws.

Correct Donna. You've spotted the supermassive black hole in 'free' market theory.

HJ

I'm a bit bemused by this piece.

Many Tories, such as John Redwood, did oppose the bank bailout. Ultimately, however, the causes of the crisis were government and central banks stoking an asset price and credit boom (by targeting only consumer price inflation) and extensive, but box-ticking, regulation. People were encouraged to think that banks were safe because they met the regulatory requirements and because (correctly, as it turned out) they were being offered an implicit government guarantee against failure. Without either of these, people putting their money into banks would have been more circumspect and the banks would have been forced to behave more prudently

As for separating retail banking and 'speculative' (i.e. investment) banking, Nick Cohen seems to be unaware that the first banks to go bust were retail-only (i.e. mortgage) banks.

Laura Marcus

@Bob Living standards have indeed risen *for most* people. But not all. A huge swathe of the British public have seen no discernible rise in their living standards and for many that have seen improvements, these have come about by use of credit.

The dirty little secret is that since the early 70s, the buying power of the average wage has stayed static, if not declined slightly. Labour hid this by presiding over an era of cheap credit, booming house prices and tax credits that subsidised employers paying low wages.

The reality is only just starting to hit. Many hard-working Brits can't afford to live decently in this country and certainly not well, often despite doing more than one job.

Is that the fault of the banks? Or a particularly vicious kind of capitalism where the top one or two per cent can never have enough and no amount of greed will ever sate them?

Ochre

What a lot of rot. The simple fact is, due to both losses being tax deductible and most of their profit being made outside the UK, that Barclays have paid the amount of tax due. How is recognition of this fact at all incompatible with the opinion that Banks should never receive socialist assistance should they go tits up? Only a nutroots lefty would think it was.

Ochre

@Erica Blair

"Previous losses which would have been much greater.....without the bailout financed by our taxes."

Barclays didnt receive any bailout cash, but if repeat a lie often enough...

David Lindsay

You can accuse Nick Cohen of many things, but ever having been an apolgist for, or even a supporter of, New Labour is certainly not one of them.

Old Slaughter

I see Blair is embarrassing herself yet again.

Nick, which taxes were being referred to?

Baron

Nick, to you as a journalist, my trilby off; your inside knowledge of the financial sector stinks though. Would being an intern in a bank for a while appeal?

The rot set in way back when the Long Term Credits banks in the US late last century got bailed out, it’s got worse since, the salvage operations funded by the taxpayer may have been the last word on solving the crisis engendered by the real estate bubble. The one bubble as yet unresolved is that of public sector borrowings in most of the top Western economies. The banks have a big role to play here, let’s hope China will see a chance of diverting some of her stockpile of greenbacks instead.

neither the balance sheet coupled regulations (hike in primary capital and stuff), nor the separation into retail, investment banking can do it. The clever bankers will find ways to side-step the former, the latter will adversely impact credit creation, no doubt about it. The best way of ensuring the banks good behaviour is first, to insist on their following the time tested rules on prudent lending, you know, 80% loans max against a collateral, 3-fold size of a loan compared with income and stuff like that. Also, making it clear to them that if they get into shite, it’s up to them to get out of it. That’s it. No deposit guarantees, loans from the taxpayer, primary capital at 10%.

kicking the bankers for big bonuses floats in the domain of insanity. Financial flows have gone up massively in the last 20 years or so, the banks make money facilitating the flows, taking a fee. The number of banks with balance sheet strong enough to take on the risk attaching to the flows, even short tem, hasn’t changed that much, may have even reduced. Hence the salivating earnings for those banks that get the biggest bite from the flows, hence the bonuses for those bank staff who have close relationship with the primary sources of the financial flows (Treasuries, funds, insurance companies, corporates). If RBS were allowed to lure Goldmans traders with the promise of doubling their bonuses, the RBS share price would have already touched a level at which the taxpayers investment could have yielded a noticeable profit. Trust me, I know, I’ve checked.

and a minor point. As Ochre @ 3.52 (and others) point out Barclays didn’t get a penny of the taxpayer’s money; the law, as it stands, says everyone, including Barclays as well as individuals, can offset allowable losses against future earnings.

Ken

@Fergus Pickering ... and that is being magnanimous. I have a host of appropriate fates that would value-add onto yours ....

Patrick Osgood

Matthew Hancock is prostituting his economics background and tory bona fides for short-term, rear-guard point-scoring. Nothing more to it than that.

All that learning to shovel equine ordure for the chancellor. Must be demeaning.

Erica Blair

I know Barclays didn't get bailout cash, but the bailout saved the banking industry as a whole. Barclays was a beneficiary as much as RBS and they should pay their share. You still have to pay insurance premiums even if you don't make a claim.

Erica Blair

To quote James Tyler of Tyler Capital,

'Barclays may not have taken direct tax payer investment, but it has supped (gorged, really) at the Bank of England’s special liquidity scheme. Without this pork geyser of state aid, Barclays would surely have gone to the wall. This was not some magical money of no consequence that was whistled up out of thin air, it was the taxpayer taking on the very worst risks that they had on their books, in return for freshly printed (electronic) cash, debasing the rest of us in the process.

Secondly, Barclays took a bet, not that bits of Lehman’s were being thrown away at rock bottom prices, but that governments would step in and bail out the banking industry as a whole, explicitly as well as implicitly, thus making those bits of Lehman’s worth something. Without the trillions of US taxpayer dollars thrown at Wall Street, those bits would surely be worthless.

Thirdly, the banking industry, Barclays included, have benefited from a hidden bailout. Quantitative easing: a process where the central bank buys assets directly from the banks (often the same bonds the banks bought from the treasury at a lower price some days before), to the engineered ‘positive yield curve’ where banks can buy longer terms assets earning high rates of interest, and then fund them at absurdly low rates at the funding windows of the central bank. The money-making opportunities given to the banks by the state, in the name of ‘balance sheet rebuilding’, are truly obscene.'

Ochre

Your holding against Barclays the fact they were beneficiaries of an artificially favourable environment?
How about those who created that environment, and the environment which obliged banks to lend to those who couldnt afford to pay back, which got the whole ball rolling? Thank you centre-left.

Fergus Pickering

I don't understand Socialists, my old son. Why are you all so bloody rich? Why haven't you given it away? Do you earn more than the average wage, and if you do, why don't you give the balance away? I just don't understand it.

Dennis Sewell

Just to bring this thread back down to Earth: What Hancock was saying was simply that the Coalition's bank levy will raise more revenue than Labour's tax on bankers' bonuses.

That's it.

Simple, really.

Geddit now, Nick?

RB

As others have pointed out, Barclays tax bill (which is significantly reduced due to enormous losses) is not a basis for drawing any conclusions about overall tax levels on banks.

On the more general point re a ‘British Glass-Steagall’ act, resistance to this should come from sensible people wherever they may stand politically because

1. A G-S style split is a rubbish idea which would not achieve the aims identified here – even if there were such a separation the failure of a pure investment bank could still be hugely disruptive – Lehman Bros wasn’t a universal bank!

2. Even if it were a good idea it would be a very bad idea to try to do it unilaterally in Britain, it would need to be done in a coordinated way across certainly the US and EU and probably the G20.

cuffleyburgers

@ Erica blair - I'll think you'll find that Barclays didn't get any bail out, actually old chap, but don't let the truth get in the way of a good story, eh?

Erica Blair

cuffleyburgers

perhaps you should read my second post which demonstrates how Barclays benefited from the bail-out. Without the taxpayers, there wouldn't be a Barclays now. Sometimes the truth is the best story.

Neil Anderson

Good comment Erica Blair. Ochre you are right to rail against Brown and his team of incompetents, but also you must see that the banking sector has taken a massive state subsidy. Why, when times are tight yet banks are still making billions thanks to our subsidy, is it not a good idea to go after them for some more tax so they contribute a fair share? Quite apart from the inherent structural issues we have such as the outrageous concept of too big to fail? The banks have not helped the vast majority of this country recently, I really don't get this knee-jerk support of them in the face of clear evidence and history?

Cuffleyburgers

@ Erica Blair - I notice you have no witty or intelligent response to my comments re public sector pay and minor council officials being paid 500000 pounds pa - I presume that's because you think that is ok?

Or is it alright because it is somebody elses money?

You make me sick

Erica Blair

cuffleyburgers

I don't think anyone should be paid £500,000 a year.

I see you've given up claiming Barclays didn't benefit from the bailout - they admit it themselves!

Get well soon.

Simon Stephenson

Good start, Neil Anderson (6.24pm), but you didn't get to where I thought you might.

The delusion under which we're all suffering is that financialisation has caused a major boost to the efficiency of value-creation, and that we can witness this in the huge wealth and income found in the financial sector. The corollary to this belief is that we must treat the financiers with kid gloves, because, for the rest of us, their goodwill is the difference between moderate prosperity and returning to the levels of the nineteenth century.

It's really time that this view was challenged, and challenged properly. There is no question that some aspects of the financial revolution have helped to add efficiency to productive endeavour - there's no doubt about this, and I fully accept that the product of some good minds has been fully reflected in growing wealth. But at the same time I would argue that the preponderance of the thinking of good minds has gone into grasping for the rewards, rather than into bettering the production process, which is the purpose for which the reward is in place.

Let's take a hypothetical situation where random groups of 20 people are gathered together; the purpose is for each group to improve its efficiency and co-operation; and the test is for a competition in a month's time in which the measure is the average time taken to get up a mountain by the slowest five members of each group.

How long before one of the groups decides that the way to pass the test is to charter a helicopter?

And what has happened to our social economy is that the chartering of a helicopter has moved from being a smart-arse trick that defeats the object of the exercise, through being a pretty cool way of winning the competition, to being the only way that anyone with a functioning brain would think of approaching the problem. We have to re-understand that getting to the top of the mountain is not in itself of any value at all, and that, in the same way, making money isn't of any value if it doesn't also achieve the purpose for which it is offered.

Steve Tierney

I am a Conservative. I DID hate the bank bailout and have always said it was a mistake. As you say, you don't reward business failure with taxpayer bailouts. Though I will admit that there were some very unusual circumstances.

My problem with you and others "banker bashing" is that the whole thing is a sorry sideshow. The banks were neither the cause nor the ongoing problem - just a symptom of the overspending culture of government in the West.

By concentrating on THEM the Left divert attention from the real culprits. The Labour party and the left as a whole. Whose crazy economic ideas lead, time and again, to disaster.

sam

@Erica Blair,

Barclays benefiting from the economic climate created by the bailout is not the same as Barclays taking bailout cash. Had they known that they bailout *wouldn't* happen they could have taken aggressive short positions and exploited equal advantage through CDS and other derivatives. All James Tyler has proved is that Barclays took the most sensible course of action in the light of the market. Which is, in fact, their legal duty to their shareholders.

HJ

It would be nice to see Nick Cohen respond to some of these comments.

He got his facts wrong.

In fact, few of us would defend the banks, but that is not the same as claiming that they were the root cause of the crisis. The underlying cause was a good old-fashioned credit boom created by lax monetary policy and profligate government spending.

Baron

Erica, darling, it pains to see a sentient human being deteriorating to a point where insanity would be preferable. Where do people like you breed, do tell us when you recover abit, will you, please.

it’s not your bigoted views that worry, you are entitled to them, it’s your glaring ignorance of things financial. You appear to have learnt the words, the jargon, you have no idea what it all represents. Your understanding of QE, the positive yield curve and stuff would embarrass a trained monkey. I suspect you’ve pinched it from somewhere, altered it somewhat to camouflage the source. Do us a favour, please, stick to your delusional views, stay away from lecturing.

and another thing: “Without the taxpayers, there wouldn't be a Barclays now. Sometimes the truth is the best story”, you believe, right? Well, without the taxpayer funded bailout there probably wouldn’t be a civil society, mostly thanks to your comrade in arms, the one-eyed Scot, his imbecilic insistence to abolish ‘boom and bust’.

Neil Anderson @ 6.24:

Get it into your grey cells, if the mushy substance residing in the skull of yours is still capable of it, that the banking sector didn’t take a massive subsidy. The Treasury, on behalf of the taxpayer bought shares in a number of banks, insured those financial instruments backed by currently ‘non-performing assets. For the latter, the banks pay a premium as does anyone else taking up an insurance. The Treasury’s equity investment in the like of RBS would have already paid off if the political gnomes running the show left the bankers to get on with their job. Trust me, I know, I've checked.

As far your idea for more taxes goes, listen what happened when the Coalition, applauded by nutters of your and Erica’s caliber, hit the non-doms, another favorite hate phylum in modern Britain. The tax raised £162mn in the first year, but 16,000 non-doms, some 12% of the total have waved Britain good-bye. The Treasury says that before the 30K tax pa/per head was brought in, all non-doms paid £4bn in income tax, and an additional £3bn in capital gains tax, stamp duty, VAT. Hence the gross loss in taxes from those non-dom leaving comes to roughly £800mn, net loss £650 or so. Envy, my blogging friend, can never be a smart foundation for tax revenues.

Simon Stephenson

Baron : 5.16pm

You made these non-dom claims on this thread:-

http://www.spectator.co.uk/coffeehouse/6714173/bad-banking.thtml

and they seemed not quite right to me, so I raised the following points as a comment tothe thread:-

Errr

How many didn't depart, but just gave up non-dom status and remained in the UK?

What effect on the overall tax-take did this change of status have?

If 12% represents 16,000, then the remaining 88% would represent some 117,000. At £30k each, the annual total revenue should be approx £3,500 million. Why was only £162 million collected?

You've assumed that the 12% who "upped and offed" paid on average the same amounts of IT and CGT as those who remained. Wouldn't you expect, however, that those who left were less involved with the UK: were paying less UK tax than the average; and for whom the £30k levy was a burdensome charge fairly easily avoided?

Baron

Simon Stephenson @ 6.43:

the figures I quote are in the public domain, i.e. the number of non-doms leaving, their total number, the tax raised and the rest.

have no idea why the total tax raised from the levy didn’t amount to £3.5B, possibly because many didn’t pay it, the size of their offshore income didn’t justify it. They simply declared the actual income, hence no additional take receipt from the £30K levy.

you right though, I did average the phylum, it’s not accurate, but it’s the safest approach when one lacks specific data. Whatever assumptions one cares to make, the loss of tax remains substantial.

Simon Stephenson

Baron : 7.38pm

Thanks for your reply.

I see from a City A.M. article that only 5,400 people have actually opted to pay the £30k levy - hence the £162 million take you mention. Of course the £30k was only due from those who'd been resident non-doms for 7 years or more, and what proportion this is of the total non-dom population i've not been able to discover.

Alexander Pelling

"Hancock wrote:

'Balls takes positions he knows not to be true, like the ridiculous claim that taxes on banks are falling when in fact they are going up.'

On cue, this morning’s papers reported that

'Barclays paid out just £113m in corporation tax in 2009, despite making a pre-tax profit of £11.6bn.'"

Surely you're just conflating two completely separate matters. The question whether or not taxes on banks in general are in principle "going up" is not affected by the corporation tax on a particular bank for 2009. It just seems to me that as a matter of simple logic the second quotation does not in any way undermine the first. If you want to know whether taxes on banks are "going up" you will need to examine the tax code for (say) the past five years and consider it in the light of published plans for the future. But that would be hard work.

Baron

Simon Stephenson @ 10.49:

sorry about the delay, am permanently short of time. I was able to discover only the sum the tax raised, the other bits, but then I haven’t searched enough. The tax seems wrong both in principle, in its application, too. It puts off those who may have been hired for their skill to do a job, does bugger all to the mega rich, leisure class, football club buying non-doms. What’s £30K for Abramovich?