As the General Election nears, the debate over how best to energize the British economy will, surely, grow and grow. I admit that I personally have no answers, but I’m sick of hearing people suggest ideas which are, frankly, ridiculous.
Let’s begin by noting that today Barclay’s Bank posted profits of £11.6 billion, despite not taking a penny of public money, refusing in fact, to take it. And yet people are still criticising them for being profitable and contributing to the economy. Given that the financial services industry contributes 9% of GDP, we should be more supportive of banks who have got it right, at no cost to us, and without whom all the spending plans dreamt up by the left would be in tatters.
One glorious idea is a ‘Robin Hood’ or ‘Tobin’ Tax, which they hope will raise £400 billion, or half of the total profits for the global banking system. Leaving aside that unless all governments agreed to this banks would probably leave, and frankly if someone wanted to take half of my post-tax earnings so would I, the idea is ridiculous, and not only because it misrepresents the Robin Hood story.
In the same way that creating a 50% rate will almost inevitably lead to fewer people paying the top rate of tax, and therefore a decrease in tax income for the government, taxing the banks who are responsible for such a large share of GDP will ultimately lead to their contribution decreasing. The government needs to take a large share of the blame for the mess which this country finds itself in. We are saddled with debt, and they have no strategy for changing that, except for kicking the banks while they’re down. Without them, however, the British economy is going to take an extraordinarily long time to recover.
This doesn’t mean that reform isn’t necessary, it is, in particular the Bank of England, the Financial Services Authority and the Treasury need to find a way of collaborating rather than blaming each other and solving nothing. I’m not entirely convinced that forcing the banks to divide is a good idea, but in the short term it might allow the publicly owned share of each bank to be sold profitably.
Like it or not, thanks to the work of Margaret Thatcher, this country relies heavily on the financial sector. The sooner we can sell our stake at a profit, reducing the deficit, and allow this major GDP contributor to return to its leading position in the global economy, the better off Britain will be.