John McDonnell

To succeed in government we must learn the lessons of the crash

John McDonnell
To succeed in government we must learn the lessons of the crash

THIS LABOUR PARTY conference is being held in the shadow of the tenth anniversary of the financial crash. We must never forget the reasons for, and the lessons of, that event. Ten years ago the greed of the City brought down our economy.

As far back as the mid-1980s I assisted in publishing and promoting a booklet by Dennis Skinner and Brian Sedgemore warning then of what was called the ‘Big Bang’, which turned large sections of the City effectively into a casino as regulations on our banks were removed. The financial sector gambled on a daily basis with billions of pounds, with a recklessness that ignored risk.

But it was not the bankers who would pay the price for the crash that followed. As a result of Tory austerity it was the rest of society that shouldered the burden. And it was the most vulnerable who suffered the greatest cost. Just one stark example is sufficient to demonstrate the suffering that followed. Research by Liverpool University attributed over 500 suicides to the impact of the brutal benefits regime imposed upon disabled people.

When the banks collapsed in 2008, we argued for an overhaul of our banking system - but we were ignored by the incoming Tory-led government. So ten years on, it is time we learned the lessons of the crash and introduce a tax that will raise billions for our public services as well as bring greater financial stability.

A financial transactions tax (FTT), popularly known as a “Robin Hood tax”, is explained in detail in Improving Resilience, Increasing Revenue: the Case for Modernising the UK’s Stamp Duty on Shares (A. Persaud, May 2017). Professor Persaud estimates extending the existing stamp duty reserve tax (SDRT) at a new, lower rate to further categories of financial derivatives, and removing the ‘market maker’ exemption, will raise £4.68bn.

The next Labour government will never again allow finance to become the master of the economy, rather than its servant.

  • We will overhaul a financial system that takes deposits from manufacturing and technology industries, and lends them to promote speculation in the real estate sector, as it does today. And instead we will put finance to work for the real economy.

  • We’ll set up a strategic investment board to promote and direct investment and boost wage growth.

  • We’ll work with the bankers and financiers who want to help us rebuild our economy, but we’ll root out the greed and corruption.

  • We’ll break up the immense concentration of wealth and power of the square mile. No longer can we allow our capital city to be used as a hiding place for the ill-gotten gains of overseas oligarchs.

  • So we will introduce a special oligarch levy to restrict their dirty money from flooding into our property market. The oligarch levy (the offshore company property levy) will be charged on properties bought in the UK through offshore companies. At a rate of 15% of the sale price, Professor Prem Sikka has estimated that, allowing for behavioural impacts, this will “conservatively” raise £1.65bn.

  • And we will close the tax havens and break up the tax avoidance scams. Labour’s tax transparency and enforcement programme will be the most comprehensive set of anti-tax avoidance measures ever introduced by a British government, conservatively estimated to raise £6.5bn. Labour is committed to a Scandinavian-style public reporting of personal incomes over £1 million as a means of both reducing the scope for avoidance, and building public support for our tax system.

  • To deliver the finances and investment we need as we go into government, Labour will set up a £250bn national investment bank and linked regional development banks, which will be charged with delivering the long-term investment finance businesses across the country need to succeed and grow.

All our aims and hopes contained in our last manifesto, and to be constructed in our next, depend upon securing the resources we need to implement these exciting policies. Our pragmatic programme for harnessing the existing and the new financial institutions we will create is key to this success.

Shadow Chancellor, MP for Hayes and Harlington, Chair of the Socialist Campaign Group of Labour MPs and Chair of the Labour Representation Committee. John has been involved in Labour Briefing since the early years.