Osborne is the real Robin Hood

At the ECOFIN (European Finance Ministers) meeting in Brussels yesterday the Chancellor George Osborne emphatically did his job protecting the UK from an EU tax grab. The UK will pay 80% of this tax and it will hit our economy hardest. Ironically, too many EU countries have not met their Millennium Development Goal (MDG) commitment to put 0.7% of their GNI to development aid. The UK is committed to this target. Other EU countries want to pay for their MDG commitment by taxing the UK which is already keeping its promise.

The UK charities that are promoting this pick pocketing should be ashamed of themselves. They know that if they ask EU states to meet MDGs out of their tax revenue, as the UK is, they will get told to go away. Instead they think that it is easier to ask the UK to pay twice. No thanks.

Are the Occupiers and Robin Hooders just unwilling to work their way up like their parents?

The nature of wealth in our country is very poorly understood by most people. The Office for National Statistics has been doing some work to try to understand wealth. They did a survey called “Wealth in Great Britain, 2006/8”.

If you look at wealth distribution it looks like those at the bottom have pretty much nothing and those at the top have a disproportionate share, hence the “We are the 99%” rhetoric of the Occupy protestors. See this chart of wealth distribution below:

On the face of it the bottom decile in the UK have pretty much nothing and the top decile are worth around £4 million per household. This looks like a massive disparity. Is it? Probably not.

First off this analysis ignores the fact that most of us start off poor, with nothing even, and get relatively wealthy over the course of our lives. When I graduated in 1984 I had an overdraft, even then, of £800 and my only tangible asset was my stereo system which I might have been able to flog for £30. Apart from a few records which I might have got a few quid more for I had nothing else I could have sold and no savings. I was very lucky to have a good education and be raised by parents who instilled good values into me. I got myself a good job and today I am on my third property and have largely paid off my mortgage. I have built up some pension assets, like most people not enough. I am now over half way up this graph having started off in the bottom decile. When you start to understand and accept the wealth lifecycle then the Occupy rhetoric starts to look rather shaky. The age distribution graph below shows this effect quite clearly.

Note how the very wealthy have disappeared in this picture. They are hiding in the difference between the median and the mean across the age groups. If age was not a massive factor this graph would be flat and the gap between median and mean larger.

However stark this kind of age distribution is it has nothing whatsoever to do with social injustice. In fact it demonstrates clearly that most of us start with nothing, we work, accumulate assets and then we have something. Finally, we retire and spend our way through our money, leaving some residue to our children if we are lucky.

The ONS work shows that wealth distribution is not as stark as you might imagine in the UK and that a huge driver of wealth inequalities is just age. The picture is even better than even I paint though. There are two major classes of financial asset that are not even recorded in this work.

First off the massive benefit of security of tenure of subsidised social housing is not included. Many millions of poorer households in our country enjoy this benefit, which significantly compensates for wealth inequalities yet no attempt is made to value this benefit in the work. Lifetime tenancies and the ability to essentially pass on the tenancy to a further generation are huge, unquantified benefits.

Secondly, no attempt is made to capitalise the value of the income stream represented by state sector pensions. State sector final salary pension schemes are not included. If a valuation of the notional pension pot required to service these obligations was included in this analysis wealth inequalities would drop even further.

The 99% line is simply nonsense. If we halved social housing rents and doubled state pensions we would have no impact on this measure of wealth distribution yet we would have made tens of millions wealthier. Equally if we did the opposite they would get no poorer on this analysis!

Obviously there are significant numbers of people who are really poor and have little prospect of getting wealthier. They may have disabilities, chronic illness, a poor education, a history of offending, drug problems or some mixture of these factors. Society needs to help these people but the rest of us need to help ourselves and pay the taxes required to support those that cannot support themselves. But, these are not the 99%. These are the odd few percent.

It is daunting to be young today. I remember though being properly awed, and lonely, when I came to work in London in 1984. The early eighties were a hard time too. It is not easy and the debts associated with student loans and tuition fees add to the burden of today’s young people. But, there is an answer. Get a job. Work hard. Save. Buy a house. You will start poor and end up rich. It looks like a long road to a twentysomething. It feels like only yesterday that they were starting to a pensioner.

G20 ignores Robin Hood

Essentially the G20 ignored the Robin Hood Tax. Their final communiqué said:

82. We agree that, over time, new sources of funding need to be found to address development needs. We discussed a set of options for innovative financing highlighted by Mr Bill Gates, such as Advance Market Commitments, Diaspora Bonds, taxation regime for bunker fuels, tobacco taxes, and a range of different financial taxes. Some of us have implemented or are prepared to explore some of these options. We acknowledge the initiatives in some of our countries to tax the financial sector for various purposes, including a financial transaction tax, inter alia to support development.

I think the only coherent interpretation of this is “Do your own thing if you want”. The UK is doing its own thing. Meeting its Millennium Development Goal commitment to spend 0.7% of GNI on development aid by putting aside revenue from existing taxes. It would be great if the rest of the world would dig into their own pockets, as we are quite rightly, and not try to pick our pocket.

The Robin Hood Tax will steal from regular people

I think some of the people that support the Occupy LSE and Robin Hood Tax campaigns have a slightly warped view of wealth in the UK. There is very little work done to explain actual wealth but the Office for National Statistics did do some work recently. They did a survey called “Wealth in Great Britain, 2006/8”.

The survey covered the period July 2006 to June 2008. Over the two-year period the Wealth and Assets Survey achieved a sample size of 30,595 private households. Grossed to the population, this represents 24,580,000 households.

The report underlined what some of us already knew. Wealth in Britain is not dominated by the yachts and mansions of the super rich. It is dominated by regular people’s houses (39% of wealth) and regular people’s pension funds (39% of wealth).

The Robin Hood Tax will only further diminish pensions by increasing the frictional costs associated with holding all asset classes. Pension funds do entirely reasonable things such as balancing their funds to track indices and maintain a spread of investments across different sectors. They change the mix of assets in a person’s pension pot as they age from relatively high risk, high return asset classes such as equities to lower risk, lower return asset classes such as bonds. All of these transactions would be taxed by the Robin Hood Tax increasing pension charges and depressing pension returns further still.

The Robin Hood Tax will also make mainstream products such a fixed rate mortgage more expensive. Underlying these products will be a derivative which allows the building society or bank to lay off the risk of offering a fixed rate.

The Robin Hood Tax will steal from regular people.

Oxfam’s UK Artist Liaison Manager

I have been keeping an eye out for Oxfam’s Robin Hood campaign. I do find it strange that this huge UK charity thinks that it is appropriate to spend so much money lobbying for a change in the tax system. Oxfam set up the Robin Hood Tax website and has put 2 or 3 of its staff on the campaign to act as spokespeople for the campaign. I imagine that they are also paying Bill Nighy’s expenses whilst he is in Cannes. A very expensive place.

I have asked them how much they are spending on the RHT campaign but so far they have refused to divulge the information. They merely point out that their overall annual campaigns spend in £15.7 million. Doing some simple maths on their last annual report this translate into 18% of their net unrestricted income.

In my wildest dreams I could not have imagined that Oxfam employ a lady called Raakhi Shah who describes herself as Oxfam’s UK Artist Liaison Manager. It is quite simply beyond parody.

Maybe Oxfam should pursue aid rather than tax?

At PMQs yesterday the Prime Minister David Cameron made a good point about supporters of a Tobin tax needing to be wary that EU states will use it as an excuse for not acting on foreign aid. In response to Caroline Lucas’ question (28:20) he said:

We must be careful that we don't allow other countries, including some other European countries, to use a campaign for this tax that they know is unlikely to be adopted in the short term as an excuse for getting off their aid commitments.

We in this House, in this country, can be proud of the fact we are meeting our aid commitments. Don't let others use this tax as a way of getting off things they promised.

The Coalition Agreement made a huge commitment to overseas aid on behalf of the UK:

The target of spending 0.7% of GNI on overseas aid will also remain in place.

Do Oxfam, CAFOD, etc really want to see EU governments prevaricate for years on their aid spending on the basis that they can’t get a Tobin tax agreed with Singapore? Or Shanghai? Or whoever else thinks that they can set up an offshore centre to catch the business?

Why doesn’t Oxfam spend its £15.7 million annual campaigning war chest persuading some other EU governments to front up more aid cash? Just to give that figure some context UK political parties are limited to spending £18.96 million every four or five years to persuade the country to vote for them. Oxfam spends pretty much that every year.

It seems that Oxfam & co. want to see the rest of the EU rape London, which would pay 80% of the EU tax take, to pay their dues. So we get to pay twice. Thanks Oxfam, Archbishop Rowan Williams and sundry Occupy weirdies.

Swedish finance minister says: "Noooooo!"

According to the BBC:

A European financial transaction tax is unlikely to raise the sums of money projected as it would encourage firms to move overseas, Sweden's finance minister has told the BBC.

Anders Borg said Sweden abandoned its own transaction tax after most trading companies left the country.

The tax "had a very detrimental impact on our financial markets", he said.

If the European Union introduces the tax, firms could simply move to New York or Asia, Mr Borg said.

In theory the EU's version of Tobin will raise £50 billion of which £40 billion will come out of London. In practice the tax will raise very little but will destroy London's capital markets businesses. In Sweden they raised 3% of what they were expcting and quickly gave up but not before their capital markets transactions had migrated to ... London.