GUEST COMMENT: I'm finding it incredibly hard to tolerate the hypocrisy of the 'British taxpayer'
It's surely saying something when a former Labour minister says banker bashing has gone too far.
Yet this is just what Kitty Ussher, the former City minister-turned Demos Director, has done. Kitty authored a report which points out that the financial services industry employs 1 million people in the UK and accounts for 11.2% of the country's total tax take. This being so, she wisely observes that it might be unwise to either demonise the industry or to make fatuous statements about rebalancing in favour of something else.
More to the point, Ms. Ussher talks of the hatred of banks as an irrational and "persistent boil of hysteria and resentment."
Too right.
It's time the 'British taxpayer' recognised both the hypocrisy and irrationality of blaming banks entirely for the country's current economic predicament. Next time anyone feels the urge, sheeple-like, to bash a banker, I suggest they bear the following points in mind:
1) The bailout of banks was effectively a bailout of the entire economy
If the banks hadn't been bailed out, the building company employing Joe Thetaxpayer wouldn't have been able to function tomorrow. Bailing out the banks was effectively bailing out Joe. Everyone benefitted from the bailout, not just bankers. Equally, everyone rode the tide of liquidity on the way up.
2) The average homeowner has been more of a freewheeling speculator than banks, private equity funds, or hedge funds ever were
A mortgage is fundamentally exactly the same financial concept as a leveraged buyout.
An LBO normally uses around 30% of equity and requires the PE backer to contribute the other 70% as debt. In a mortgage, a deposit of 10-20% was, pre-credit crunch, standard. The high street banks happily put in the rest.
Private equity funds and homeowners both hope for a rise in the value of their asset to make their investment worthwhile. However, many homeowners have relied upon the rising value of their asset and low interest rates to make their investment merely viable. This is speculation of the worst kind.
3) Average taxpayers have been as keen to exploit tax breaks as everyone else
A lot has been made of the fact that private equity bosses and banks don't pay much tax. In the case of private equity bosses, this is because the capital gains tax they're liable for when they exit their investments is levied at a lower rate than income tax.
And yet, home owners have benefited from more generous tax breaks still. When a home is a primary residence, capital gains from its sale are entirely tax free. Some people invested in property with precisely this in mind.
4) Average taxpayers have been just as keen to indulge in financial engineering as everyone else
One of the worst examples of private equity's debauchery is dividend recapitalisation, under which PE funds increase the debt on a company's books in order to take cash out.
This is financially nefarious, and yet it's precisely what mortgage holders did when they remortgaged to fund their lifestyles.
The reality is that financial chicanery was commonplace across society, not just among bankers. To suggest otherwise is hypocrisy and stupidity, pure and simple. At least Ussher has had the decency to point this out.
