Feb 23 2011

UK’s implicit bank subsidy = cost of NHS – Haldane

Posted by: Nick Shaxson in: Thoughts

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.

Indeed.

25 comments so far

[...] This post was mentioned on Twitter by Ma and Chris Roberts, Nicholas Shaxson. Nicholas Shaxson said: Haldane: UK's implicit bank subsidy in 2009 = cost of #NHS http://bit.ly/fOWg7U @ukuncut [...]

[...] In Treasure Islands I wrote a fair bit about this theme of tax havens as roots of the latest financial and economic crisis, most especially in a chapter entitled “Ratchet.” Now I’m going to add some new material, and rely quite heavily on the recent presentation by Andrew Haldane of the Bank of England, which I’ve just blogged. [...]

[...] implicit subsidy that banks have been receiving from the government, as Andrew Haldane recently noted. The fact that something is implicit doesn’t mean it isn’t real – City banks [...]

[...] the financial crisis have been left virtually untouched. As Andrew Haldene of the Bank of England recently pointed out, our yearly implicit subsidy to the banks is equal to the entire NHS budget. On 28 May we will [...]

[...] the financial crisis have been left virtually untouched. As Andrew Haldene of the Bank of England recently pointed out, our yearly implicit subsidy to the banks is equal to the entire NHS budget. On 28 May we will [...]

[...] banner ‘UK Uncut: Emergency Operation’ and will draw attention to the annual estimated £100bn/year state subsidy to financial [...]

[...] One alternative is to make the banks pay for huge ongoing taxpayer subsidies: a chief executive at the Bank of England put the cost of subsidies at £100bn in a single year [...]

[...] a new age of austerity, in which the blame is pinned on profligate government spending, and not on the economic costs of the crisis, the bailout and its aftermath, and the other great scandal of modern life in the West — [...]

[...] a new age of austerity, in which the blame is pinned on profligate government spending, and not on the economic costs of the crisis, the bailout and its aftermath, and the other great scandal of modern life in the West — vast, [...]

[...] underwritten by the public. In 2009, Andrew Haldane, a chief executive at the Bank of England, put the value of this subsidy at £100bn, which he pointed out “is roughly what we spend on our National Health Service”. The [...]

[...] Last Year, Andrew Haldane, a leader in the Bank of England, place the regard of this subsidy…, that they stated "is roughly [...]

[...] underwritten by the public. In 2009, Andrew Haldane, a chief executive at the Bank of England, put the value of this subsidy at £100bn, which he pointed out “is roughly what we spend on our National Health Service”. The [...]

[...] underwritten by the public. In 2009, Andrew Haldane, a chief executive at the Bank of England, put the value of this subsidy at £100bn, which he pointed out “is roughly what we spend on our National Health Service”. The [...]

[...] underwritten by the public. In 2009, Andrew Haldane, a chief executive at the Bank of England, put the value of this subsidy at £100bn, which he pointed out “is roughly what we spend on our National Health Service”. The [...]

[...] widespread tax evasion by corporations and rich individuals, estimated to cost £95bn a year, and the “implicit subsidy” to UK banks in the wake of the 2008 crisis, in which high-risk behaviour is essentially underwritten by the [...]

[...] stopped tax-dodging by corporations and the rich (£95bn/year), ended taxpayer subsidies to banks (£100bn/year) or introduced a wealth tax to raise money from the £4 trillion held by the richest in our society [...]

[...] Another is to make the banks pay for free insurance provided to them by the taxpayer: a chief executive at the Bank of England put the cost of this subsidy at £100bn in a single year. [...]

[...] them by the taxpayer: a chief executive at the Bank of England put the cost of this subsidy at £100bn in a single year.Either the tax avoided and evaded in a single year or the ongoing taxpayer subsidy [...]

[...] Another is to make the banks pay for free insurance provided to them by the taxpayer: a chief executive at the Bank of England put the cost of this subsidy at £100bn in a single year. [...]

[...] public money pumped into the City have done nothing to help the economy, and have, perversely, just enriched bankers further at public expense. As Milne put it, the banks are “pumped up with state subsidies and liquidity that they are [...]

[...] Et alternativ som de belyser er å slå ned på skatteunnvikelser begått av bedrifter og rike folk, estimert å koste staten 95 milliarder pund årlig (kilde).  Et annet alternativ er å tvinge bankene å betale for forsikring – som dem nå får gratis av skattebetalerne – estimert å bringe inn ca 100 milliarder pund i året av en tidligere sjef i Bank of England (kilde). [...]

[...] Another is to make the banks pay for free insurance provided to them by the taxpayer: a chief executive at the Bank of England put the cost of this subsidy at £100bn in a single year [...]

[...] la subvención. Un alto ejecutivo del Banco de Inglaterra cifró el costo de este subsidio en 118 mil millones de euros al año. Tanto la evasión fiscal de un solo año, como el continuo subsidio que pagan los ciudadanos a [...]

[...] Había nacido UK Uncut. Un movimiento de base que lleva a cabo acciones para resaltar las alternativas a las políticas de recorte del gasto del Gobierno tory. Para ellos, sí que hay alternativas, pero el Gobierno las ignora. Una de ellas es tomar medidas drásticas contra la evasión legal de impuestos de las corporaciones y los ricos que, se estima, cuesta al Estado 112 mil millones de euros. Otra es hacer que los bancos paguen por el subsidio implícito que le proveen los contribuyentes, es decir, que los bancos no puedan afrontar riesgos altos en base a sus expectativas, conseguir grandes beneficios y, finalmente, tras ser rescatados por el Gobierno, mantener esas ganancias y llevarse la subvención. Un alto ejecutivo del Banco de Inglaterra cifró el costo de este subsidio en 118 mil millones de euros al año. [...]

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