The 2020 Public Services Trust Blog

“If you want to turn London into a Marxist society, then great…”

At the risk of wading in to an area I know too little about… interesting to read reaction to Adair Turner’s comments this week on the idea of a global tax on financial transactions – known as a Tobin Tax.

This is essentially a tax on currency speculation, and a proposal that some development economists have floated as a means of generating revenue to support economic development in the global south.  In fact, the original purpose seems to have been more focused on dampening market volatility – as Tobin himself put it, throwing “sand in the wheels” of the market.

Obviously the finance industry have opposed this, along with those who argue that such a thing just isn’t feasible (tax avoidance reasons, for one).  But at Avinash Persaud notes in the FT today, times have changed:

“The real question today is not … feasibility; but … desirability. It is hard to argue that anything is not feasible today after governments have engaged in whole-scale bank nationalisation and credit guarantees, pushed budget deficits into double figures, become the buyer of last resort of assets they would not normally touch with a barge pole and threatened to legislate against private sector pay. Where there is a will there is a way.”

So I guess one reason why the idea might fly today is that global regulators are looking much more critically at a ‘swollen’ financial market, and a need to address excessive profit-making in the financial sector.  This is quite a conceptual shift and, as one might imagine, one that is not shared by many bankers (one of whom was responsible for the quote above).

There’s a serious trade off underpinning all of this – between the need to make sure we don’t return to the culture of excess and irresponsibility that brought us through boom, bust and recession; and the need for London to maintain its comparative advantage in an important revenue-generating industry.  Strong vested interests muddy the waters, so Lord Turner will need to navigate a difficult path between morality, social justice, regulatory prescience and macroeconomic stability.  Good luck to him.

Like many people, I am a big fan of The Wire.  So I have been watching with interest as reaction to Chris “the Wire has become part of real life in this country” Grayling’s comments has spread around the blogs and comment pages.   The Shadow Home Secretary wanted to draw attention to the parallels that exist between Baltimore’s projects and some of the UK’s inner city council estates, specifically citing a “culture of deprivation, harm, addiction and failure”.

Some have predictably jumped on these comments, showing statistics that rubbish any direct comparison between Baltimore and Manchester.  Some have been more forgiving, providing editorial space for the non-enlightened to get up to speed on the Wire’s gritty realism.  And whilst its always a bit cringeworthy watching politicians wading into the cultural zeitgeist (Brown and the Arctic Monkeys?  Blair and Jackie Milburn?  Hague at the Notting Hill Carnival?), this time warrants a bit more thought.  So here goes…

The first thing you notice is that it feels a long way from Michael Howard in the mid 90s – “lets take the handcuffs off the police and put them back on the criminal where they belong..”  One of the central messages of the Wire is of the interconnectedness of the street, the Police Departments, City Hall and the upper reaches of politics.  Self-interest and dependency is intertwined at every level.

The Wire might also reinforce the notion that a fish rots from the head – it is corruption of political leadership that sets the (im)moral tone for the strata of society below it.  By this argument, MPs fiddling their expenses might be as culpable as the ‘criminals’ in the piece.

Thirdly, the Wire doesn’t necessarily reinforce a message of underachievement – rather it’s a sense of dignity, achievement and individual gain that often drives the kids on the corner – marginalised as they are from mainstream education and social care.  Maybe an allegory on the natural endpoint of liberal individualism – or at least a strong suggestion that society is important, and we should emphasise the responsibility we have collectively, as well as to ourselves.

Finally – there is brutal irony in our politicians (though not all of them) experiencing the problems experienced in our inner cities via DVD box set.  It doesn’t necessarily follow that awareness of a complex and deep-seated set of problems will lead to well-thought out and meaningful strategies to deal with them.  And without this commitment, citing the Wire is as meaningless as a baseball cap.

The death of Senator Edward Kennedy after a long battle with malignant brain cancer will deprive the US Senate of one of its finest and longest serving members. Many people in the UK only know about Senator Kennedy because they knew he was a member of the Kennedy Clan, but today we mourn the passing of a truly great public servant who despite his ill health remained one of the most influential figures in the party and continued to dedicate himself to the quest for universal health care – and through his continued commitment to defend the poor and politically disadvantaged he helped to enact measures to protect civil and labour rights, expand healthcare, upgrade schools,  and made a difference in creating a better society in America.

The BBC’s Richard Lister in Washington says Senator Kennedy, known affectionately as Teddy, will be remembered as one of the most effective and popular legislators in American history – I would go one step further and say that when the history of the Senate is written he will be remembered as one of the greatest of senators of all time.

The BBC has done a nice video summary of the life of Senator Kennedy here.

Some interesting debates going on over the Compass campaign for a high pay commission.  I’m going to try and set out some of it here:

Arguments For:

• Some people earn an absolute fortune – true
• Some people have repeatedly been rewarded for what most of us would see as failing – true
• The government acted pretty successfully over low pay, establishing consensus over the minimum wage – true
• A better and happier society would be a more equal one (or certainly less unequal) – progressives would probably say true

But say the commission is established, and sets a salary cap.  This might not be a good thing because:

• A high salary cap would be indiscriminately lump together the bankers, with the entrepreneurs, with the footballers, with the pop stars etc etc on the basis of salary – true
• It would therefore penalise some people who work very hard, and deserve their rewards (salary or bonus) – maybe true
• It would ignore nuance in the value or spin-off benefits from these high salaried jobs – true
• It would set an obstacle to high pay, but not an insurmountable one (people would use bonuses, incentives etc to get round that) – definitely true
• It’s effectively a ceiling on aspiration, and thus damaging economically and morally – maybe true, but how many of us will live to find out?
• High pay in the highest performing organisations is a function of a well-working market, so the government shouldn’t tinker with it – hmmmmm- not sure what the economic crisis says about this…

An alternative suggestion – put forward this week by David Aaronovitch Hamish McCrae (and there are other ideas) – is to make earnings transparent, along with establishing a more open and ‘straightforward’ tax system.  This sounds good, though certain footballers have demonstrated that public knowledge of salary details does not necessarily translate into more self awareness…

Anyway, I’m undecided about this one, and eager to hear more arguments for both sides. Anyone want to help?

Families who are grieving will not only have to worry about inheritance tax but it emerged over the weekend that they will hit by a new stealth tax, the Government is imposing a 3 percent interest charge on the IHT. Relatives of the deceased are required to pay 40 percent IHT on estates worth over £325,000 within six months of the death, after which the interest will be levied.  This unethical move will raise about £10million for the government.

To do this in the current economic climate makes no sense.  The Telegraph amongst others makes the following point:

“Families who are forced to sell properties who are forced to sell to cover IHT bills are likely to be hardest hit by the current market conditions. The current interest rate will force relatives of the deceased to sell properties in a struggling housing market instead of waiting for conditions to improve.”

I believe in redistribution of wealth and the choices we make through life do sometimes determine how much we give back, whether we own a car or not or buy a house.  But IHT is like no other tax – we don’t choose when we die and to levy interest on relatives after they have lost a loved one is morally wrong, maybe no one in government knows the pain of losing someone close to them.