Barclays bank forced to admit it paid just £113m in corporation tax in 2009

[pinkteddy]

At the same time it recorded £11.6bn profits.

Can't quite believe there isn't a thread on this already.

Oh yeah, of course Barclays are pearly white and any criticism is just down to biased lying journalists... maybe if there'd been a few more journalists criticising the City - or anyone had listened to George Soros - we wouldn't have got into this mess.

Barclays can do all the PR spin they like about being 'independent' - the truth is they are still reliant on the taxpayer guarantee. And if AIG hadn't been bailed out, Barclays would have looked very risky indeed.

Noone is saying they are pearly white but that we shouldn't be criticising them based upon untrue & inaccurate statements. Facts are fine.

Yes, if AIG hadn't have been bailed out then Barclays would look risky. Just like a lot of savers suffered if the UK hadn't bailed out Northern Rock. Is that the fault of the savers? Should they now pay more tax or be called fat cats?

Barclays did not join the asset protection scheme so it is not reliant upon the "taxpayer guarantee" at all (link here).

Edam - but the question is how did we get into a situation where bailing out banks was considered in the best interest of the global (or at least western) economies?

There is significant work going into restructuring and adapting the banking industry to prevent this happening again. But I think we have to live with the fall out of the last crisis. And Barclay's has a duty to it's (somewhat beleaguered) share holders to minimise it's tax exposure.

The other big question is how banking appears to be the only industry where shareholders are happy to split profits 50/50 with the workers. (ironically sounds like a Marxist dream).

Back to the OP. I've just come across this blog.

Five Howlers Made by the Guardian in Reporting the tax paid by Barclays,

The Guardian is increasingly looking foolish.

What about their responsibility to the taxpayer and the citizen, who is underpinning the whole banking system - at the cost of our jobs and our public services being slashed?

Jackstarb, could you give us a little more detail about how the banking industry is being restructured? Because I haven't seen anything that convinces me bankers or regulators have addressed the scale of the crisis, recognised what went wrong and designed reforms that will stop this behaviour in future. Maybe I've missed something crucial. But from an outsider point of view - i.e. one of the victims, not the beneficiaries - there's been no sign of repentance at all. Far from it.

I know this may fall on deaf ears Edam but virtually all the cuts now are not because of the banking crisis but the fact that the UK have run a budget deficit for nearly 30 years.

In fact, in the long run we'll probably a tidy profit from bailing the banks out.

The US government has already made a $12bn profit when it divested it's stake from CitiGroup.
According to these economists looking at 8 centuries of financial data, bank bailouts actually work out relatively cheap, compared to the cost of letting a bank go bust. If a bailout is managed correctly, and the subsequent recovery, it can become profitable (as per the Citi example above).

There is quite a lot going on in terms of trying to reduce the risks that led to the crisis. Basel 3 raises the capital adequacy requirements above any level that they have been before, and local governments are raising them higher (for e.g. in Switzerland they now require about 17%). There's also the creation of pan-European regulators, in an attempt to come up with a more consistent approach, and to grow other European financial centres, leading to less dependance on London (e.g. Paris, Frankfurt). There are also new regulations coming in regarding short-selling, CDOs etc.

And, regarding "all the fancy products that eliminate risk" etc. - most of the people who work on structured products, produce the risk models etc. have PhDs in mathematics and engineering, so yes, they are quite clever. I have no farking clue what they're on about most of the time.

I am disappointed in Jill Treanor, who I usually admire, and the other Guardian journalists for messing up this Barclays story.

They had a story but they have totally diluted its effect for anyone with half a brain by having so many "howlers."

If it makes anyone feel better, banks are set to become far less profitable. They now (and in coming years) have to hold much more regulatory capital, their funding costs are higher and likely to remain elevated, and their most-lucrative business lines are being regulated out of existence (either directly or even moreso by being too capital intensive to generate profits).

Barclays itself cut its target return on equity to 13% last week. That is a measure of how much it makes from the capital it puts to work. In the early to mid 00s, that number was above 20%. Last year, it was 7.2%.

Unfortunately, the banks are still operating mainly on behalf of their employees, so it's shareholders and customers who take the biggest hit in the form of low dividends/high fees. Bonuses may be down but overall pay is pretty static.

goodnight - Good post.

The Guardian could have an important role in holding the government and big business to account. But they need to get their facts straight. Otherwise they will become irrelevant to the debate.

Edam -This Mervin King's speech is a good summary of the various possible approaches to reforming the Banking Industry.

Oops This is the one I meant.

OP - What do you mean "forced to admit"? Surely, as a public company, it announced its financial statements on time and taxes paid were clearly stated there for all to see.

Cote - i think a lot of the detail in the Barclays story came from Bob Diamond's written followup to the Treasury Select Committee after having testified a few weeks back. They asked him to come back with some more info. The MP quoted in the story (who is on that committeed) then shared the info with the Guardian.
I'm not 100 pct sure but I think in their annual report they give a headline tax figure but not broken down by geography. The story was specifically on UK tax paid.

Thanks for the links.

Abs, problem is those people with PhDs believed their own mythology. Actually in reality it turns out they weren't very clever at all, were they? Just got carried away like a bunch of toddlers. Maybe if the banks had employed a few historians instead of economists someone would have mentioned the South Sea Bubble. Or tulips. Or any of the 1001 other examples you could mention.

As for the idea we'll make a profit out of it in the end so that's fine, it's like being told to be grateful to a highwayman because he claims he'll pay you back.

I'm sure if the government had invested in many of the companies or sectors that have been allowed to go to the wall we could have had a return on investment. But the City told us that was bad business. So ordinary people lost their jobs, and their pensions. Whole towns, even regions have been laid waste. Looks suspiciously like one rule for the City, one for everyone else - and they have the cheek to expect us to be grateful.

Last child in bed, now i can get back to the thread... which has moved around a bit since i was last here. apologies in advance that i'm referring back to another thread rather than the o.p.s - i don't tend to frequent aibu so i missed that discussion.

I can see why people found cinnabarred's post informative as it presented her point of view very clearly. I still don't agree with it though.

I think it's important to decide what we mean by "We really do need them [the banks] to be here and to be doing well." If we mean that we need the banks to be expanding and chasing the biggest profit at any cost, as has been happening up to now, then I think that we need to reassess our views of what it means for a bank to do well.

Someone on the other thread described the tax exemption thus: " It's about not killing the goose that lays the golden egg". That anyone still considers the financial service industry to be the goose that lays the golden egg makes my head spin. The Office for National Statistics has just released its estimate that the Royal Bank of Scotland and Lloyds banking group alone have been bailed out to the tune of £1.3 trillion. This does not include the figure for bailing out Northern Rock and Bradford and Bingley. I'm afraid I just can't get excited about the banks' £50 billion taxes when I read those figures.

Others above have stated that reform of the banks has already begun. Then I'm afraid they are not doing a very good PR exercise of publicising these reforms, because people need to see that, before banks are given any tax incentives to grow bigger and chase profits overseas, they have reformed to the extent that they won't find themselves begging governments to bail them out again - and i don't think it's hysterical posturing to suggest that the bubble could burst again. if they are already reforming, why the secrecy? why are the public being shushed with "stop the bank bashing" instead of details of reforms.

A few specific points that I disagree with. Cinnabarred says that it is not the case that losses will still be offset for the large corporations who will be exempt from these taxes.The government's discussion document seems to state otherwise, with options being suggested and affordability being discussed.

This in turn impacts on Cinnabarred's claim that the measures are meant to help small businesses. It seems to be a win-win situation for large corporations, but only they will benefit from tax exemption and some form of loss relief if the measures are indeed introduced. small businesses need not apply.

Finally, Cinnabarred dismisses the term "race to the bottom" thus:

" You may have heard the phrase "race to the bottom" - it's the idea that "good" jurisdictions have to sink to the level of "bad" jurisdictions in order for their tax systems to remain competitive. But I don't see that in practice. Instead, what's happening is an emerging consensus in the international tax community about the norm of best practice, with intense pressure on non-compliant countries to step in line"
but I'm afraid I don't see how this "emerging consensus" of "good practice" differs from the concept of the race to the bottom.

I do hope that more can be done internationally to regulate the banks to ensure that they are working for society and not, as recently, working to society's detriment. I'm naive that way.

Oh and one more (naive) question... about banks upping and leaving. Can the banks who are now owned or part owned by the government actually, legally do that? Would anyone have them?

jeezo - i've never posted this much in my life. my fingers hurt.

Ragged - too much post for me to comment on it all .

But I think you need to be cautious about the ONS number of £1.3 Trillion. That appears to be total potential exposure of the UK tax payer not allowing for the bailed out banks 'illiquid' assets. If you factor in the bank assets (which the tax payer owns) then it's appears neutral over the medium term.

One other point - the UK's bailed out banks won't leave. But the top uk bankers might (think multi-lingual PHD mathematicians). Several hedge funds have already relocated from London (the largest having a total tax take equivalent to Telford's tax take).

Ragged Robin

Here is just over 100 pages on potential reforms to avoid the need for bail outs going forward. ec.europa.eu/internal_market/consultations/docs/2011/crisis_management/consultation_paper_en.pdf

This EU consultation closes in about a week and is on top of the changes to capital, corporate governance etc.

Ideas in the consultation include Recovery and Resolution planning, early intervention powers, resolution tools e.g. bridge bank, sale etc (modelled on the UK's Banking Act 2009 with a sprinkling of Dodd-Frank), bail in etc.

The Swiss have already required the issue of Contingent Convertible debt (CoCos) by the two big Swiss Banks. CoCos are debt instruments that automatically (usually) convert into equity once a trigger is met e.g. capital ratios fall below a specified level.

I think as has already been mentioned above one of the key issues was that it was felt to be unacceptable to let more banks fail. Partly it was due to the already difficult state of the economy and partly because there wasn't really a framework within which you could manage a bank failure.

Let's not forget that the US Government also bailed out the auto industry.useconomy.about.com/od/criticalssues/a/auto_bailout.htm

It was a very strange time in the economy.

"it appears neutral over the medium term"

oh, well that's ok then. everyone! stop worrying!

chaz: here's hoping that the consultation can effect some real, beneficial change.

Ragged Yes, the British Tax payer now has a rather large investment stake in the banking industry . Lets just hope they don't fail us.

This FT article (you need to register) is excellent reading. Banking - The Debt Net. It explains the key initiatives for removing the need for another tax payer bail out.

'Bail ins' and CoCo's apparently!

the government will almost certainly make a good profit on the RBS and Lloyds stake. (Lloyds is currently "in the money" on the net price paid for the shares while RBS is a bit below.)

and lots of steps, both regulatory and policy, are being taken to guard against future bailouts - that is positive.

The bottom line is banking will become less profitable for the banks but it is also almost inevitable that customers will bear some of the pain. For example, "free" current accounts could become a thing of the past ...

the bank bail-out is beginning to sound like a happy accident. sounds so good, perhaps we should nationalise them all?