Italy is levying a windfall tax to help mortgage holders. Would/could/should the UK do the same?
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Italy is levying a windfall tax on banks to help mortgage holders. Would/could/should the UK govt do the same?
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There's an argument for Italy's intervention as the ECB dictate monetary policy for the whole EU block. However, in the UK the central bank is increasing rates because they want to take money out of homeowners' wallets. Giving it back to them would be counter productive, despite the overall failure of the bank. The fact that this is being discussed is evidence of the lack of control Andrew Bailey has got on the issue.
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Seems perfectly reasonable to apply a windfall tax on Banks making billions of additional profits due to raising interest rates to help the most affected by the increases. Though personally, it should be the Bank of England paying as they are the ones who have repeatedly raised rates, with that having no impact on inflation at all, the benefits to inflation coming from fuel cost reductions and agriculture. Their whole handling of the crisis has been a joke, with no surprise when this led to bringing in other experts to tell them how to do it properly. However, the UK government didn't really windfall tax the energy companies, so do not hold your breath on any mortgage support from the government either.
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A windfall tax is a tempting option. After all, taxpayers bailed the banks out in 2008, it's only fair they help borrowers now. However, the law of unintended consequences would soon come into play, as helping borrowers would maintain house prices at their artificial highs. First-time buyers would continue to need massive deposits, beyond the reach of many. Lower house prices would be far more beneficial overall.
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It is something I think a lot of the big banks will be concerned about, especially if it looks likely they will be posting record-breaking profits at the end of their financial years - the government will be under huge pressure from the opposition and the public to do something similar if struggling households wake up to hear that HSBC, Barclays, Lloyds, NatWest, etc have recorded multi-billion pound profits off the back of all there struggles and suffering. One thing to look out for is the amount of money they provision in their accounts for bad debt; it would be very easy for a Bank to reduce its profit by over-provisioning for future poor debts, avoiding the public backlash of posting record-breaking profits, then revisit the amount provisioned in later years to release profits back to shareholders once the glare of the spotlight is no longer on them.