UK taxpayers will fund US bank's losses

For the past quarter century, governments, both Labour and Tory, have prided themselves on being 'business friendly'. Over the years, though, that term has become a euphemism for allowing investment banks and other City institutions to do whatever the hell they like. So, while Merrill Lynch is being sued by the US government for mis-selling toxic sub-prime debt, the same bank is taking advantage of the UK's tax regime to offset all its losses against its tax liability. Yes, that's all its losses, worldwide.

Merrill Lynch has transferred $29 billion worth of losses, mostly from its US operations, to its UK subsidiary in London. This means that, despite any profits it might make in the future, the UK arm of the firm will be able to show a loss for many years to come. The Financial Times estimates that even if Merill Lynch's UK operation were to continue to generate profits at 2006 levels, a record year,  it would pay no UK corporation tax for the next sixty years.

In  this country the super rich can have it both ways. They can shift their income outside the UK to avoid tax while bringing their losses into the country to offset it against what little tax they still pay.  Allowing City institutions to do as they please has been justified on the grounds that they create jobs and pay lots of tax. But Merrill Lynch isn't paying tax any more and it is laying people off in London.

As the FT says in its editorial today, investment banks are bad taxpayers.

Financially based cities are facing the same challenges as others that were heavily dependent on single industries did in the past. The decline of western coal-mining, shipbuilding, steelmaking and car manufacture have afflicted cities such as Leeds, Glasgow, Sheffield, Pittsburgh and Detroit.

Investment banking is not dead but it is in a cyclical downturn. It has occupied an outsized role in western economies in the past decade and is now shrinking. This cyclicality, and its tendency to make losses every few years, make it an unreliable financial partner. Let the taxman beware.

Successive British governments have pandered to the City for decades. Now, our low regulation, low tax regime has come back to bite us. As the FT says, the government will have to find other sources of revenue. That will be the rest of us then.

But something else strikes me as odd about this story. Where is the anger from the UK's left-wing bloggers? Surely this is a classic case of rich capitalists privatising their profits and making everyone else pay for their costs.  As an illustration of our government's feebleness in the face of the excesses of global robber-baron capitalism, it doesn't get much better than this.

Yet a trawl of my favourite left-ish sites found no mention of this scandal.  The Liberal Conspirators, judging by the comments traffic, are mostly worried about right-wing attacks on Obama, foundation schools and whether the Greens can beat the BNP. Bob Piper and Neil Harding are too busy having a go at Cameron.  Nothing either from Justin, Norm, Sunny, Brockley Bob or the Bloggers for Labour.  Even Oliver Kamm, who claims to be a leftie and, as a former investment banker, might have had something to say about this, is silent. At the very least, I would have expected an acerbic 'Merrill Lynch are thieving cunts' type of comment from Pigdogfucker.

Where is the left-wing outrage when you need it?

Comments

[Dave]

You're not looking at the right leftie blog, mate:

http://www.davidosler.com/2008/08/it_seems_we_all_owe_merrill_ly.html#comments

[Steve]

I'll check your blog out in future Dave.

The 'widespread outrage' you called for hasn't happened though, has it?

[Wolfie]

Your average leftie is a bit thick and gets very confused by all this economic stuff. Obviously Dave is the exception but it also explains why the country is in such economic peril after 10 years of a complete fool running the show.

A subject I've avoided for purely selfish reasons.

[small-brother]

There appears to be a trade off by HMS :-

Secure the financial institutions to stabilize the stocks & shares, public saving & current accounts held by banks, secure loans for business and houses,
But at the expense of :-
Higher taxes for public in due course, strict regulation of both banks and loan seekers, contain risky capitalism practices, tax office overseeing the public banking practices.
Its a lose and lose situation for the general public.