This outlines the problem. The politicians are so intent on votes that simple common sense goes out of the window. I highlight below the near halving of the tax take and the loss of £ 25 billion in taxes from the City. If our own politicians persist in strangling this golden goose it will lay no more eggs and you and I will have to make up the shortfall at the very moment that recovery may be teetering at the tipping point.
If people make money we - the taxpayers - get the benefit from the taxes they pay. Envy and spite are vicious beasts which usually hurt their owners.
Christina
BLOOMBERG 24.9.09
Banker Bashing Joins U.K. Leaders Gearing Up for Vote (Update2)
By Robert Hutton
Sept. 24 (Bloomberg) -- U.K. Prime Minister Gordon Brown and Conservative opposition leader David Cameron have one thing in common. Both say Britain’s financiers need to be reined in and punished.
Brown’s Labour government is tightening bank rules and curbing bonus pay, part of a crackdown coordinated with the Group of 20 nations, whose leaders begin a summit in Pittsburgh today. Cameron has promised a “day of reckoning” for the “irresponsible” rich if his party takes power.
With the two biggest parties gathering for annual meetings in the next two weeks, Britain’s leaders will drift further from an implicit pact with the banking industry to regulate lightly in exchange for economic growth and tax revenue. The 2008 rescue of the financial system and elections in 2010 mean bankers will remain targets of lawmakers and hopefuls.
“The financial crisis has changed the landscape,” said Mark Hoban, the Conservatives’ spokesman on financial regulation. “When taxpayers have to stump up quite big sums of money to bail out banks, they expect a much more intrusive regulatory structure.”
Bankers say politicians risk killing the British economy’s golden goose, driving out jobs and institutions. The City of London financial district employed 444,000 last year and generated 11.7 billion pounds ($19.2 billion) of corporation tax -- about a quarter of the total -- before the September 2008 collapse of Lehman Brothers Holdings Inc.
‘Jeopardize Prospects’
“We will seriously jeopardize prospects of any recovery in the U.K. economy if we continue to denigrate the only industry which has sufficient economic weight to make a real difference,” said Stuart Fraser, the head of policy for the City of London, the financial district’s lobby.
For two decades, Brown and his predecessor, Tony Blair, wooed the City. They rejected the position of previous Labour lawmakers, including former chancellor of the exchequer Denis Healey, who promised in 1974 to tax the rich until there were “howls of anguish.”
In 1998, Peter Mandelson, now Brown’s business secretary, said he was “intensely relaxed about people getting filthy rich.” That set the tone for an administration that kept the top tax rate at 40 percent through three elections.
Since Brown took over from Blair in 2007, he has angered businesses and the wealthy with a series of tax increases. He shelved a break for entrepreneurs and imposed a new levy on wealthy foreigners.
Popular Anger
Polls show voters are upset about the financial crisis. Brown, French President Nicolas Sarkozy, German Chancellor Angela Merkel and President Barack Obama in the U.S. have responded by stepping up plans to rein in banks.
Only 9 percent of British voters think Brown’s government performed well in the financial crisis, down 6 points since November, according to a Harris Interactive Inc. survey finished June 29. Sarkozy had the approval of 8 percent and Obama 16 percent, according to the survey of 6,362 adults in five nations.
Underscoring the risks that prevailed a year ago, Bank of England Governor Mervyn King told the BBC in a program to be broadcast today that two British banks got within hours of a liquidity shortfall on Oct. 6, 2008, and the day after as the U.K. financial system came to the brink of collapse.
Banks on the Edge
“Two of our major banks which had had difficulty in obtaining funding could raise money only for one week then only for one day, and then on that Monday and Tuesday it was not possible even for those two banks really to be confident they could get to the end of the day,” the BBC cited King as saying.
On Oct. 8, Brown’s government pledged to invest 50 billion pounds in the banking system. In the year ended March 2010, tax receipts from the financial and housing sectors fell to 2.5 percent of gross domestic product from 4.25 percent the previous year, a drop of 25 billion pounds.
Brown now wants banks to hold extra capital if regulators decide their pay structures encourage too much risk. Plenty of observers believe the banks still are getting off too easily, said John Kay, visiting professor at the London School of Economics and author of “The Truth About Markets.”
“The respect and fear continues,” Kay said. “There’s a certain amount of puerile noise about bonuses, but basically bankers have got everything they’ve asked for, and given nothing in return.”
In Britain, Brown’s party trailed the Conservatives by 17 percentage points in an ICM Ltd. survey finished on Sept. 20. As Labour gathers in Brighton from Sept. 27 to Oct. 1 and the Conservatives prepare to meet in Manchester from Oct. 5 to Oct. 7, each has toughened language against banks.
Tougher Rules
“Financial regulation was not tough enough,” Education Secretary Ed Balls and one of Brown’s closest advisers, wrote in the New Statesman last week.
City Minister Paul Myners made the point more personally.
“Derivative traders are not footballers with unique talents, and should not be paid as though they are, ” he said on Sept. 18. “Banks need to understand that they have lost the trust of the public and need to change their behaviors and values in order to earn forgiveness.”
Such talk is “dangerous” and may harm the economy, said Peter Levene, chairman of Lloyd’s of London, the world’s oldest insurance market. On Sept. 18 he lamented that bankers have become “demonized” as “hate figures.”
Anyone hoping for a better deal from Conservatives should note that Cameron proposes a higher levy than Labour has introduced on wealthy people who avoid taxes by claiming non- domicile status. George Osborne, the opposition lawmaker in charge of finance, says removing the top tax band isn’t a priority.
Brown’s Taxes
In April, Brown broke a pledge to maintain tax rates. The Treasury is aiming to raise 6.9 billion pounds from 750,000 people earning more than 100,000 pounds a year by reducing relief for pensions and personal allowances -- and by taking 50 percent of all earnings above 150,000 pounds a year.
“Banker bashing is convenient,” said Thomas Kirchmaier of the Financial Markets Group at the London School of Economics. “The bankers are doing a very bad job in both coming out with a mea culpa and getting on top of the debate.”
To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net
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