Andrew Haldane of the Bank of England, recently one of the most astute observers of the follies of the world’s banks, has just given a remarkable presentation at the Institute of International and European Affairs in Ireland. He doesn’t mention tax havens but there are some fascinating, fascinating tax haven facts to be drawn out of the presentation. I will get to those – but first, a startling statistic. here is Haldane, in his own words (about 18 minutes into the presentation, if you want to check it):
Let’s take 2009. The implicit subsidy to UK banks in 2009 was around 100 billion pounds sterling. Which is roughly what we spend on our National Health Service.
This ‘implicit subsidy’ is, as Haldane puts it, the subsidy “ that comes from the expectation of a ride to the rescue” by the government. In other words, banks can take a load of high risks based on this expectation, gain vast profits, and eventually get bailed out, keeping the profits and reaping the subsidy.
Earlier in the presentation, he also gave some estimates of the total costs of the crisis, globally. The most striking of various estimates he made this time was this:
“By how much do we think output now and in the future may have been lost? We know from past crises that output falls to begin with but never returns to higher path. Tot that up over time, 50-200 trillion – a multiple of world GDP – this time round. This is what makes the case for us to do something different. (This may not be completely word-for-word but it’s a good enough approximation)
Phew! If you want the pdf of his presentation, it’s here.
Next, we get into the relationship between banking and tax havens. That calls for another blog. (Hat tip for this one: Naked Capitalism.)
Update: nice letter in the Guardian, which notes – in relation to the recent bank protests – that:
For the taxpayer to have borne the cost of saving the banks, but for those very losses to be used to reduce the banks’ corporation tax liabilities in the future, is a double blow to the exchequer and an insult to the taxpayer.