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Thursday, 26 January 2012

Let Fred keep his knighthood - it's not just the bankers fault we're in a mess

Lots of talk at the moment about Sir Fred Goodwin's knighthood and whether he should be stripped of it or not.  This week, it was confirmed that a panel of civil servants (the so-called forfeiture committee) is looking into it and that he may have to defend his knighthood in front of the Financial Services Authority.

I can't help thinking what stripping Goodwin of his knighthood would actually achieve.  It may be technically possible to do it.  It may make people feel good.   It would certainly relieve some pressure on politicians who are desperate to show they are doing something about "immoral capitalism". But, in itself, it will do absolutely nothing whatsoever to correct unfairness or inequality. 

Select committee evidence this week found that Goodwin had been incompetent, but not guilty of "dishonesty or lack of integrity".  He gambled, and taxpayers lost.  It isn't fair or right.  But our time would be better spent making sure that never happens again, than in making ourselves feel better by taking away his knighthood.   Better spent ensuring that Goodwin's successor at RBS, Stephen Hester, receives a more modest bonus from taxpayers money than the reported £1.6m.

It reminds me, too, that for all the talk about "responsible capitalism", there is a key mechanism to deliver fairness and it's called taxation.  Politicians scratch around and tinker with their notion of "responsible capitalism", suggesting things like greater transparency on executive pay, but seem to forget that taxation is still as good an answer as any. 

I'm not sure that the Lib Dem's mansion tax is the way forward (it would surely penalise those who are property rich, but may be cash poor - who have inherited property which others either worked hard or benefited from fortuitous economic circumstances to bequeath). 

Better, instead, to target the vast loopholes in Capital Gains Tax on the biggest private equity deals.  It's private equity, not banking, that produces an even higher tier of the super-super rich:  those rich beyond the comparatively meagre earnings of Hester or the FTSE100 CEO's and whom the "responsible capitalism" debate hasn't yet touched. 

It's not just all about Fred and the bankers.  What about private equity?

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