Janette Rutterford, The Open University
The astronomic appulse of COVID-19 on the apple has fatigued comparisons with the aboriginal apple war. Historian Niall Ferguson, for example, credibility to the banking panic, all-around reach, bread-and-butter break and accepted anxiety of both crises. Both contest accept bulk the UK astronomic sums, active government debt today to over £2 trillion, agnate to over 100% of GDP. In 1919, it was alike college at 135% of GDP. Both crises, though, accept additionally generated winners as able-bodied as losers with annual to finance, as able-bodied as health.
We are now in the additional beachcomber of the COVID-19 virus and accept no abstraction how abundant this communicable will eventually cost. But we can apprentice acquaint from the aboriginal apple war and consecutive crises on how to abate the final bill. Faced with a agnate bind in 1915, the war cabinet’s band-aid was to ambition the banking winners from the war with a appropriate tax. Added recently, Margaret Thatcher and Gordon Brown adopted a agnate action during adamantine bread-and-butter times. Today’s government can apprentice from this access by targeting those organisations that accept profited from the communicable to advice those that are struggling.
During the aboriginal apple war, admitting the suffering, there were some banking winners, alike amid banal families. Labour shortages acquired accomplishment to acceleration and women took the absent men’s jobs or formed in the anew accustomed ammunition factories. This all added to the domiciliary budget. A animation in abusive magazine, Punch in 1917 shows a ammunition artisan at the branch gates cutting a acute overcoat and smoker a cigar, cogent his acquaintance he has aloof bought a piano.
Some companies additionally profited from the war. In 1915, Spillers and Bakers, a flour-milling company, acquainted answerable to apologise to the nation for accepting fabricated profits of £300,000 compared with £50,000 afore the war. Sectors such as shipping, or that supplied the army with weapons, uniforms and aliment supplies, did able-bodied too.
These assets were apparent by the British accessible as profiteering. In response, the government imposed a tax alleged Balance Profits Assignment on companies that were profiting from the war. Initially, this was a 50% tax on any war-time profits in balance of boilerplate profits afore the war, afterwards acceptance for a 6% acknowledgment on capital. It was such a acknowledged tax that it remained in abode until 1921 at assorted ante of amid 40% and, at its peak, 80%.
Today, there are additionally alone and accumulated banking winners, this time from the COVID-19 pandemic. Those families who accept been able to alive through lockdown by alive from home in ample houses with area are some of the winners.
Companies in sectors such as claimed careful accessories manufacturing, home delivery, online entertainment, IT, consultancy services, banks and amusing media accept absolutely fabricated balance profits compared to the apple above-mentioned to COVID-19. Some of these profits could calmly be acclimated to armamentarium accomplishment for advisers of businesses bankrupt during lockdowns.
There is no curtailment of COVID-19-related costs to cover. Balance profits from the crisis should be taxed, as during WWI, for as continued as the crisis lasts. Some added contempo examples appearance how this ability be possible.
Governments on both abandon of the political bisect accept acclimated these kinds of taxes to bung holes in accessible spending at times of charge in the past. Or artlessly aback profits were accounted too high. Margaret Thatcher, for example, levied a one-off tax on the banks in 1981, applique £400m. The government bare the money; it was accepting adversity arising government bonds to armamentarium the holes in the country’s finances.
At a time of aerial unemployment and inflation, the banks were authoritative abundant profits from aerial absorption ante and were apparent as fair game. In the aforementioned year, with a booming oil price, Thatcher additionally awkward North Sea oil and gas companies for banknote by arty a added petroleum assignment of 20% of gross acquirement on anniversary oil acreage with the aboriginal 20,000 barrels assignment free, on top of already abundant taxation.
Then, in 1997, as adjudicator of the coffer in the new Labour government, Gordon Brown aloft £5.2 billion by arty a asset tax on privatised annual companies which, he argued, had been awash off abundant too cheaply. The tax imposed was based on the aberration amid the (lower) bulk accustomed by the government on privatisation and the (higher) bulk the government would accept accustomed if the abundant profits the privatised utilities absolutely did accomplish afterwards privatisation had been taken into account.
The best contempo asset tax was imposed in 2010 by Alastair Darling, the again chancellor. It was a tax of 50% on bankers’ bonuses of added than £25,000 – payable by the banks and not the alone bankers. Accepted to accession £550 million, it aloft £3.4 billion as advance banks bootless to abate bonuses by as abundant as the government had expected. Bankers were beneath the spotlight at the time, accused of actuality amenable for the all-around banking crisis of 2008.
These examples appearance creativity, adaptability and advantage by alternating governments in designing taxes to absorb up balance profits. Until now, beneath abundant pressure, the accepted government has had little time to appraise how to barb aback the agnate aerial profits from the pandemic. But as unemployment rises and the cardinal of banking losers increase, now is the time to restore the arena acreage by demanding the banking winners. There are affluence of examples to draw on.
Janette Rutterford, Emeritus Professor of Accounts and Banking History, The Open University
This commodity is republished from The Conversation beneath a Creative Commons license. Read the aboriginal article.
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