The Robin Hood Tax

Edit: To anyone unawares of what I'm blathering on about here, take a quick peek at the video on this website.

Just in case anyone was left wondering when the next time we were going to be patronised by multi-millionaire movie stars about how rich bankers are, the Robin Hood Tax campaign comes along and lets us known that the time is now.

The sheer volume of bizarre misinformation regarding the campaign is as intimidating as it is mind-boggling. I'll try and offer my opinions in as orderly fashion as possible, but it is a rather confusing mess.

1 - A tax that costs a single industry up to £250bn (that's enough to pay for our military for over 8 years, by the way) isn't "tiny". You could tax my salary at 20%, or you could tax it a "tiny" 1% twenty times - it's still not tiny, because of the massive accumulation. If the suggestion that they can afford it (since it's only a tiny proportion of their turnover) is somewhat at odds with the much-referenced fact that a lot of them have just taken a massive amount of... well, not "our" money, but fake money the government's invented that we'll eventually have to pay off. If they had £250bn to just piss up the wall on an inconsequential tax, they probably wouldn't have needed a bailout. And that's sort of the point, right - this isn't a tax on their profit, it's a tax on their turnover. So a bank (even without ever having received any taxpayers money, such as HSBC) could fail to make a profit in a year and STILL pay billions of pounds in a "Robin Hood" tax. That's really a good system?

2 - People seem totally disconnected with where this money comes from, goes to, or what it does. People seem of the opinion that it's made up of charging them for going over their over-drafts and credit card interest. It's not. The vast majority of it goes into people's mortgages (thus the whole crisis in the first place, as the sub-prime market crashed) and in business investment. A lot was said about banks being "less willing" to lend following the crisis. It was because their supple of credit dried up. Supply dwindled, demand remained the same or increased, thus it's more expensive. They weren't "unwilling" to lend anymore than BP are "unwilling to sell petrol" when prices go up. They need to sell petrol to make money, and banks need to lend money to people and businesses to make money.

You take away yet more of their supply of credit, and their ability to offer loans at affordable rates goes down yet more. It's not the "fat cats" with their Bentley's that get hurt, it's people trying to get mortgages and loans for their businesses. This means businesses find it a lot harder to expand (or stop themselves collapsing altogether), which means less jobs, which in turn means less tax and more unemployed bums on the seats of jobcenters picking up their JSA. I don't know how many times history has to teach us that when you target a specific industry for taxes, it's not the business that get hurt, it's the consumers, before we start listening. Businesses only exist because of their customers. If you make it more expensive for businesses, the customers end up paying more, because that's where the money comes from.

3 - There are a lot of banks out there who weren't run into the ground and are still making profit. They neither wanted, nor received any government bailout. So why should they be forced to pay an extra tax? The idea that "they can afford it" is an incredibly dangerous road to go down. It's important to remember that the government can't "grow" the economy. They can attempt to sustain it temporarily, or even suggest bouyancy, but it's a totally circular design - The government doles out money, people spend it, the government taxes it and they get it back. Except, obviously, they lose money every time. Resources get used up. The private sector is the only one that can "create" wealth. The idea that if you take more and more money from the private sector to dole out - however good the intention - and it not affect the performance of the economy is blasphemously short-termist and economically just incorrect. You can't just take more and more of their money and expect them to simply stop buying Bentleys ceteris paribus. When oil prices go up, BP don't lose money, car drivers do.

4 - The banks who didn't take our money have nothing to answer for. Those who did took our money. It's ours - why are we taxing it? It's like the absurdity of taxing doctors and nurses on the NHS. What's the point? Their money comes from the treasury, then the tax goes straight back. But that's not a big deal, it just seems like a waste of paper, nothing more. In this instance, though, demanding yet more money from the banks that required our help is like issuing punishing interest rates on loans to third world countries. There's no point demanding £250bn a year if they can't even turn a profit, in the same way that there's no point demanding loan repayments from Ghana when it needs the money to build infrastructure so that they can actually make profit in the future. It's better in the long term to let them use the money, build an industry and then get the money back when they actually can afford it, because that way you get it all back (plus the interest). If we keep hammering HBOS for money when they're already on their knees, that doesn't benefit us because we own their debt. It's our debt. If they crash, it's STILL our debt. How about we let them actually make a profit, then we can sell it on when it's actually profitable. That way we get the money back. We should stop cutting off our nose to spite our ridiculously indebted face.

The answer to all these points is painfully obvious, though. It's about short-term populism. It always is. In a political world where you know you're only safe for four years, who would take the tough decisions that will reap rewards in the long run at the expense of short term popularity? This tax is undoubtedly popular, and any politician that supports it will get a (temporary, perhaps) bump in the polls. With an election 3 months away, it's not hard to see why it's gaining so much ground. There are few politicians who do what they think is right even if it means being unpopular. Perhaps looking to Greece is a perfect example of why no one does it - suggest cutting a bloated public sector and a day later the infrastructure of the country falls apart by self-interested people on the "non-productive" wing of the economy (not that the Greek government suggested cutting the public sector, merely not giving them a pay rise - something I daresay a lot of private sector workers will have to suffer through during these times, too).

But it's a shame that those who do make the tough decisions are rarely acknowledged as doing so, even in hindsight. How many other politicians that have laid the necessary groundwork for transforming an economy from one that has power cuts and mass national strikes to one that sees unprecedented levels of growth have people actively looking forward to their funeral so they can dance on their grave? And how many people even acknowledge the massive degree of self-sacrifice it took for Gorbachev to willingly give up so much power for the greater good of his country?

I think that will be the final legacy of the Labour party, actually. They were one of the few examples of a government who really knew they were going to be in government for at least 8 years, and yet managed to squander the rarest of opportunities where they could have done something unpopular in the short term but necessary in the long term without having to sacrifice power. They could have done so much.

I'm looking forward to the comments on this one!