Why is everyone still paying for the bankers' mess – except the bankers themselves?
Ten years ago I was sitting in an office in Mayfair, trading millions of dollars in derivatives for a hedge fund. I enjoyed a bumper year in 2007, as I began to profit significantly from the financial crisis few saw coming.
What I could never have predicted was that a decade on the country would still be paying for that crisis. As Philip Hammond delivers his first Autumn Budget, it’s clear the shockwaves of the global crash are still reverberating through the lives of ordinary people, compounded by the austerity policies that followed.
Frontline services continue to be savaged by cuts – with schools, hospitals, the police and local authorities all experiencing massive reductions to their budgets.
It seems everyone has paid for the bankers’ mess – except the bankers themselves. 2008 should have been a wake-up call, a moment for financial sector behaviour to change but casino activity is undiminished. Once again stock markets are flying, with salaries and bonuses at bumper levels and set to rise again.
I saw first hand how quickly business resumed once the state bailouts and easy monetary policies kicked in. I quit the industry in 2012 disillusioned at how little things had been reformed. Today as a Labour councillor for Haringey, I’ve seen how local services are now stretched to breaking point. The government is struggling to fund its various commitments to education, health, housing and the elderly. And with Brexit on the horizon, a whole new level of uncertainty arises. So what’s the solution?
It’s clear that the time for tinkering around the edges has long gone and that we need action well beyond the Chancellor’s efforts this afternoon, which amount to little more than shifting rows and columns in a spreadsheet.
Bringing the UK’s current stamp duty on shares into the 21st century, closing loopholes and extending to further products including derivatives, would raise an extra £5 billion a year. Not only is this workable, it is eminently feasible and, to my mind, overdue. One year’s worth of this additional revenue could plug last year’s NHS funding gap, fix the social care funding crisis, hire 20,000 new teachers with money left over to build 80,000 affordable homes.
As someone who used to trade derivatives, I’m convinced that a tax on these kinds of transactions can now work. This is largely because since the crisis the City has in some ways reformed itself – albeit for its own survival. Since Lehman and RBS collapsed (with the UK government still sitting on a £25 billion paper loss on its stake in RBS) there has been greater standardisation of the types of products that I used to trade.
Most importantly the majority of these over-the-counter (OTC) derivative trades are now put through a central clearing system – the London Clearing House (LCH) owned by the London Stock Exchange. This makes implementing an efficient and hard to avoid transaction tax of the sort levied on shares far easier to plumb into the system.
Following the first budget since the 10th anniversary of the ‘run on Northern Rock’ and the fallout of a crash that millions of ordinary people are still paying for, the Chancellor’s pledges fall short. Modernising our present stamp duty on shares to capture derivative trades and generate genuinely needed extra tax receipts makes sense for us all – particularly for Philip Hammond and his balance sheet.
Pat Berryman is a Labour councillor in Haringey and an ex hedge fund trader.
To reach hundreds of thousands of new readers and to make the biggest impact we can in the next general election, we need to grow our donor base substantially.
That's why in 2024, we are seeking to generate 150 additional regular donors to support Left Foot Forward's work.
We still need another 124 people to donate to hit the target. You can help. Donate today.
9 Responses to “A Robin Hood Tax would work. Trust me, I used to work for a hedge fund”
nhsgp
So what the hell has your socialist welfare state done with the Trillions of pounds people have entrusted to it for their old age?
Ah you’ve spent the lot. On top of that you’ve hidden the debts off the books.
Should have taken the capitalist route like Norway and invested the money.
How do you solve a socialist problem of 12.5 trillion pounds of state debt and no assets?
nhsgp
Most importantly the majority of these over-the-counter (OTC) derivative trades are now put through a central clearing system – the London Clearing House (LCH) owned by the London Stock Exchange. This makes implementing an efficient and hard to avoid transaction tax of the sort levied on shares far easier to plumb into the system.
==============
Not when you just switch to Block chain or CBOT and avoid the transaction charge.
Why not put a 1% tax on transactions at ATMs? After all, people who use cash must be drug dealers, dodging income tax cash in hand etc. What’s not to like?
Ah yes, people would notice the tax.
COUNTRY BUMPKIN
Good old Robin eh. Most MP’s could not give 2 hoots about the public, only in it for what they can get out. They are the ‘Rogues’ Why are you all so focused on Foreign Aid?? There is one that really need amending. MP’s are too close to the city and it ops in my opinion. As for World Crash, believe it was orchestrated as the poor were at long last starting to have a decent standard of living in their countries??
David Oram
Would be great if it would work but would it. Derivative trading would simply move to other countries or loopholes would be found. Remember the tax Gordon Brown levied on share trading with a net result that day trading effectively died off and the envisaged tax revenue that was predicted was never realised.
I do agree that the Banks have not cleaned up their act, the regulators continue to fail to regulate and we will end up hitting another crisis at some point. But I am unsure what the answer is and we missed a trick on not jailing some of the Individuals who were either being dishonest or were grossly negligent.
w.d.williams
not before time this should have been done long ago there a people who were involved who have never been prosecuted for malfeasance in a public no one has been taken to court or had the proceeds of these crimes taken away this is the only tax that will work because it is on every transaction the French and others have done it why not us