Given that an orgy of stupidity has been in progress in and around St. Paul’s Cathedral for just over two weeks now it is somewhat surprising that it has taken the Church of England’s CEO, a man given to saying foolish things, this long to open his mouth and insert his foot.
However presented once more with the pulpit of the MSM (in this case in the shape of the Financial Times) from which to preach, the Archbishop of Canterbury has gratefully seized the opportunity to do just that and did, yesterday morn, issue a sermon.
If his article was full of waffle about what has been going on at the Cathedral then we could – and would – quite happily have ignored him. However as he couldn’t help but slip in his opinions on matters temporal, viz banking and economics, he once again needs to be taken to task.
There is help to be had from a bold statement on our financial situation emerging last week from the Vatican. This document, from the Pontifical Council for Justice and Peace, is entitled ‘Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority‘. It contains, along with some sharp critical analysis a rather utopian vision of global governance and regulation. But, more importantly, it offers three quite specific recommendations that seek not to change everything at once but simply to minimize the damage of certain current practices and assumptions in the immediate future.
Ah, so it turns out that Williams hasn’t had an original idea (perish the thought) and is instead taking his lead from the Vatican. That is, surely, more then enough reason to have Brenda, as Chairman of the Board, send him to the Tower so that he might consider the error of his ways…
His future, or lack there of, aside what are the papist ideas which he wishes us to consider?
One is something we have now heard clearly from many sources – a plea now endorsed by the Vickers Commission that routine banking business should be clearly separated operationally from speculative transactions. The rolling-up of individual and small-scale savings into high-risk and high-return adventures in the virtual economy is one of the more obvious danger areas in the light of recent years. Early Government action in this area is needed.
Remind me, how much did the ‘casino’ arm of Northern Rock lose? How much did the retail arm of Lehman Brothers lose?
A second plea is for the recapitalization of banks with public money to be accompanied by obligations on the banks to help re-invigorate the real economy.
No and no. No bank should have been propped up by the poor bloody tax payer, being instead allowed to fail. Savers would have been fine up to the tune of £35,000 and investors, as is the case with any failed business, would have lost out. However what’s done is done there (sadly) but why should these newly acquired state assets be forced to lend money? You can’t re-capitalise them, thus allowing them to rebuild their balance sheets, yet expect them to lend money to all and sundry once again.
But the third suggestion is probably the most far-reaching. The Vatican statement strongly backs the proposal of a Financial Transaction Tax – a ‘Tobin Tax’ or, popularly, a ‘Robin Hood Tax’ in the form in which it has been talked about most recently. This means a comparatively small rate of tax (0.05%) being levied on share, bond, and currency transactions and their derivatives, with the resulting funds being designated for investment and development in the ‘real’ economy, domestically and internationally. The modest rate of taxation conceals the high levels of return that could be expected (some $410bn globally on one estimate).
I don’t know where the Archbishop is getting those figures from but even if we give him the benefit of the doubt and say that it isn’t a retired tax accountant from Wandsworth, that $410 billion is a rather high number. Using the 2010 GDP figures we can see calculate that the $410bn figure is 0.65% of the total, which is somewhat above the theoretical 0.05% tax rate given.
Thankfully, via Clifford Chance, who have looked at the EU’s own analysis, we have some more realistic figures available to us:
The Commission paper estimates the tax itself would raise €16bn to €43bn, but the figure is very dependent upon the degree of dislocation, and previous reports suggest the Commission’s original estimate was €10bn. Revenues would be shared between Member States and the EU (partly reducing national contributions).
The Commission does not however estimate the reductions in receipts from other taxes. Stamp duty revenues are currently quite significant – £4bn in the UK alone. Add to this reduced corporation and personal tax receipts – the Commission’s impact assessment anticipates a reduction in economic output of almost 1.8% – and it seems likely the revenue effect of the FTT will be negative.
The FTT is therefore perhaps the first tax in history which is being proposed in the knowledge it will reduce tax revenues.
A tax that loses use money? That’ll scupper any chance of more money for government ‘investment’ then, won’t it?
Other commentators such as Charles Orton-Jones and Tim Worstall also agree, pointing out the cost of this will be passed on to you and I as customers, employees and shareholders as well as the potential loss of jobs (and thus tax revenues) if banks, hedge funds and other such financial companies decide to relocate to less hostile climates.
In conclusion I therefore repeat to the silly old fool the advice I gave him back in April
May I kindly suggest to the Archbishop that he sticks to his job and doesn’t stick his head above the parapet again unless he has actually thought about what it is that he is saying?
in the hope that this time he will take it? However as I doubt he will I look forward to filleting his twaddle the next time he decides to place his foot in his mouth.