Darling\’s coming mistakes

And they look like being big ones:

Alistair Darling is drawing up plans to face down the country\’s top bankers by taking the \”nuclear option\” of a windfall tax on their bumper bonuses as part of measures aimed at the super-rich.

This will be retrospective legislation of course. We\’re already two thirds of the way through the tax 2009/10 and now they\’re going to change the tax rates?

Yes, I know it\’s been done before (by Roy Jenkins on investment income, by Geofrey Howe on bank profits and didn\’t Gordon Brown do it to utilities?) but it\’s still wrong. Either we live with the rule of law, which means that you can\’t go back and change it after someone has already done something, or we don\’t.  And in the long term the terrors of living under the whim of man rather than the rule of law are far greater than the benefits from whatever few billions can be raised here.

The government will also underline its determination to ensure financiers pay their share of the cost of the crisis by fleshing out its plans for an international \”Tobin tax,\” to be levied on City transactions, raising tens of billions of pounds.

Oh dear. As has been pointed out (by me amongst others) you\’re not going to be able to raise tens of billions in new taxes \”from the City.\” Total value added is in the £60-£80 billion a year range. Let\’s say the plan is to get £340 billion a year then: do we really think that any sector can be plundered for 50% of total value added without one of two things happening?

1) Behaviour changes so much that there isn\’t that tax coming in (and of course less in other taxes as incomes and profits fall in the absence of that activity)

and/or

2) It ain\’t the bankers and the fat cats paying the taxes? You know, this tax incidence thing? As in, the transaction tax we do have, Stamp Duty on shares, falls on lowered pension values and higher capital raising costs for companies?

Nonsense, nonsense on stilts.