Why the banks' threats of moving abroad are empty

These threats allow banks to run rings around the government -- but are of questionable credibility.

Talk to a banker about financial sector taxes and they'll have to call you back from their Blackberry en-route to the airport, the rest of the company in tow, quite prepared to never set foot in the country again to avoid your unnecessary meddling. The world is their oyster -- Frankfurt, Hong Kong, New York they'll tell you -- so stop the talk of Robin Hood Taxes, or capital reserve requirements, or you'll soon be seeing tumble weed clogging up the escalators at Canary Wharf.

From a lobbyist's perspective, you can see why we increasingly hear banks threaten to move their business overseas -- it has given them the excuse they need to run rings around the government. Cue the crescendo around Sir John Vicker's interim report into banking regulation a couple of weeks ago. Cue the government's frustration, when the terms it set as part of the Project Merlin deal for banks to lend more to businesses didn't work. And whilst Ed Balls' should be commended for calling for a banker bonus tax to help tackle youth unemployment, I suspect it is also one of the reasons he limited it to a rather modest £2billion.

But putting the bank lobbyist's view aside, this story just doesn't add up from from virtually any perspective. Firstly, you have to ask what exactly "relocating overseas" means. Leading the charge, Standard Chartered and HSBC have both said they may move abroad. Their threats create an image of packing up entire trading floors, wealth management divisions and investment arms, but in both cases they are only talking about their corporate HQs and a small number of head office staff.

As a Financial Times editorial recently said:

Such threats should be faced down, not just because they are unreasonable but because they are of questionable credibility.... Were a bank such as Barclays to shift its headquarters, the impact on the UK would surely be minimal as it would still do much of its business and pay taxes in the country.

Andrea Leadsom MP, a former senior executive at Barclays and Conservative member of the Treasury Select Committee, agrees:

One or two of them might change their corporate headquarters for tax purposes but if they do go we probably won't even notice. There won't be a great outflow of workers and Canary Wharf won't turn into a ghost town.

Distractions about corporate relocation aside, banks still argue that increasing taxes will make the City less competitive and would lead to a drip-drip loss of business. And they would have us believe the government's new bank levy is evidence of a worrying step in that direction. But let's be crystal clear: we are in no danger of overburdening the banks.

The costs of the new bank levy will be largely off-set by a decrease in corporation tax, which is on course to be the lowest rate in the G7 by 2014 at 23 per cent. Our rules on writing off future tax payment against previous losses are a major boon, as Barclays so clearly demonstrated by paying a shocking £113m of tax on £11.6b of profit. Other countries are not so generous, or perhaps foolhardy, as a special Reuters report explains: "Swiss tax losses can generally be carried forward for seven years, U.S. federal tax losses for 20 years, but in the UK or Jersey, there is no time limit."

But here is the mother of them all -- a multi-billion pound reason why banks would be mad to move away: credit rating agencies such as Standard & Poors know the UK government (read: taxpayer) will not let banks fail because they would bring the rest of the economy down with them. This means lending to banks is a one-way bet and so their credit rating improves, which in turn allows them to borrow money more cheaply. Sound trivial? Andrew Haldane, executive director of financial stability at the Bank of England, said last year: "The average annual subsidy for the top five banks over these years [2007-2009] was over £50 billion -- roughly equal to UK banks' annual profits prior to the crisis." At the height of the crisis, the subsidy was worth £100bn.

Most countries are simply not capable of offering this kind of support. Those who are capable may not be willing to risk having to fund a bail-out. If banks do choose to move from the City of London's safety net, they are likely to have to accept lower credit ratings making borrowing more expensive.

Besides the favourable tax environment and epically-proportioned credit card we offer to banks based in the UK, there are many other factors that give London the edge: stable financial infrastructure, lack of corruption, ease in raising capital, lawyers and crucially, our location. Banks could not afford to shift to New York and miss out on European clients, and business so conveniently located in a time zone half way between Manhattan and the other major markets in Asia. Nor could they afford to ignore our pool of highly skilled workers, who in turn are attracted by the culture, language, world class education and variety of things to spend their money on.

According to a recent Global Financial Sector Index, London didn't come near the top for its financial sector competitiveness, it was number one. So next time the City of London complain they are hard done by, show them this report -- which incidentally, they commissioned.

In fact, you could argue that it is the banks that are overburdening us. HSBC's balance sheet is already bigger than the entire GDP in the UK, Barclays' is roughly equal. The Bank of England governor, Mervyn King, and others have questioned whether we really want to be carrying that weight on our shoulders -- a weight that could crush us next time things go wrong.

Neither the government or opposition should be held hostage to old arguments that banks are the powerhouse of our economy. Two years ago they lost this honour when their engine failed and we were forced to pump in more than a trillion pounds of public money to get it started again and we are still paying to keep it running today.

Nor should politicians shy away from ensuring banks pay to repair the damage they have caused, for example through a Robin Hood Tax, because of hollow threats that the financial sector will move their business overseas. By paying their fair share in taxes, banks can once again work in the interests of society. At the moment it's the other way round.

Simon Chouffot is a spokesperson for the Robin Hood Tax Campaign


Simon Chouffot is a spokesperson for the Robin Hood Tax campaign and writes on the role of the financial sector in our society.

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Moonshots for the Earth: are there technological fixes for climate change?

As the world gathers in Paris for the latest UN climate change conference, are there technological solutions for global warming? And where are the tech-utopians working to find them?

This article originally appeared in The Long + Short

At the end of August, as the northern hemisphere’s hottest summer on record drew to a close, a group of inventors, designers and engineers assembled in a grand stone castle an hour’s drive west of Paris. Château de Millemont was hosting a five-week ‘innovation camp’ for the pioneers behind 12 new projects, chosen for their contribution to achieving a world without fossil fuels. POC21 (Proof of Concept) was set up as an active, grassroots foil to cop 21, the 21st UN Climate Change conference in Paris, which begins at the end of November.

“Global emissions have doubled since the first UN climate summit in 1995,” says the POC21 video, amid images of environmental catastrophe, so “Let’s move from talking to building a better tomorrow.” The objective was to create workable open-source technology in the fields of energy, food and waste – life, basically.

Products that made it to the final 12 included a pedal tractor, a smartphone-controlled greenhouse and an antibacterial water filter. Daniel Connell, one of the chosen inventors, travelled to Paris from the UK for the event. He was picked because he’d created an impressive cost- and resource-efficient wind turbine design. You can make it for about £20 out of aluminium sheets, a bike wheel, rivets, washers and nuts and bolts.

“It’s entirely built from recycled or upcycled materials, and can be assembled by anybody with basic hand or power tools,” says Dominik Wind, core organiser of POC21. “While this makes his design a perfect fit for the people that need it most (the poor, the marginalised around the globe), it’s also the perfect design to build upon: it’s the basis to start from with more customised, possibly also more complex and more expensive iterations.”

Connell has been creating prototype technologies and tutorials for solar and wind designs while moving around the world over the last 10 years, traversing Canada, France, India and Spain. A 3D animator by trade, he is self-taught – he describes the Solar Flower, a DIY solar energy collector he created, as “my degree” – and set out to make an existing design for a wind turbine cheap and easy for people to use. “Technically, it could be $5 if you just pay for the rivets and get plates and a bike wheel for free,” he said.

A seasoned squatter, Connell made his project possible by sifting through scrap heaps, fixing up bikes and living on a few pounds a day so he wouldn’t have to work and could devote his time to the wind turbine. Connell’s ethos is inspired by the self-sufficient communities he grew up in as a child in New Zealand, and that country’s culture of ingenuity and making stuff. Since POC21, his product has improved and he’s showing it to students, retirees and other people who want to get off grid via workshops.

Connell is one of a number of green inventors working to ease the world’s transition to climate change. As wildfires spread, countries sink, species go extinct, floods and drought increase, seas rise, storms devastate, glaciers melt, crops fail, pollution decreases life expectancy and the potential for conflict grows, eyes look to the inventors, geniuses and entrepreneurs who surely can figure out a way of saving the planet.

When Pope Francis, in an unprecedented speech earlier this year, rejected market solutions for climate change, attacked “unfettered capitalism” and made a forceful moral plea, it raised the question: if individual behavioural changes aren’t realistic or enough, can’t technology provide a route out of the problem? Where is that technology? And is ‘techno-utopianism’ realistic in the context of the climate crisis?

Major companies are already divesting from fossil fuels – most recently the Rockefeller Foundation, the Church of England and Norway’s £900bn sovereign wealth fund – as burnable reserves run out and the climate change threat becomes more apparent; but local attention is also turning to how to transition to a greener world.

In the bowels of an east London theatre on a foggy Sunday afternoon a month or so after POC21, a panel discusses whether Hackney Council should divest its pensions away from fossil fuels. “There is an energy transition happening,” says Carbon Tracker’s Luke Sussams. Dr David McCoy, an expert in global public health, says, “We face an existential threat in terms of eco collapse… My 14-year-old daughter’s future does not look good.” He explains how global warming will affect disease patterns and prompt conflict over scarce resources. Yet there is some optimism about green developments in electric cars, renewable energies and Tesla’s new battery technology.

Bill McKibben, the campaigner and author who brought global warming to public consciousness with his 1989 book The End of Nature, and more recently the founder of international pressure group, is positive and excited about innovation in the green world. “The price of a solar panel dropped 75 per cent in the last six years,” he said, speaking from his home in Vermont. “The world’s engineers are doing their job; and doing it extraordinarily well.”

The move to renewable energy is under way. An Apollo-style research programme to make renewable energy cheaper than fossil fuels recently won the backing of Sir David Attenborough and high-profile businesspeople, politicians and economists. Even Bank of England governor, Mark Carney, has warned that the “vast majority of reserves are unburnable” if global temperature rises are to be limited to below 2C. But others think that it’s not enough, and consider geoengineering to be the grand techno-fix.

First presented as a big-idea solution to climate change in the 1960s, geoengineering proposals range from the seemingly fantastical – brightening the clouds; stirring the seas to change their temperature and cool the Earth; turning the ocean into a gigantic bubble bath to reflect the sun; covering the deserts in mirrors and sending parasols into space; mimicking the cooling effects of volcanic eruptions like Mount Pinatubo – to the more mundane: removing carbon from atmosphere and storing it somewhere else.

Although a number of scientists and researchers – including the Royal Society, which held a geoengineering ‘retreat’ in Buckinghamshire in 2011 – think geoengineering is an option worth considering, no one is actually doing it yet. Well, apart from Russ George, the businessman, entrepreneur and “DIY rogue geo-vigilante” who dumped 100 tonnes of iron sulphate into the Pacific ocean, triggering a 10,000-sq-km plankton bloom (plankton blooms suck carbon out of the atmosphere). Though the efficacy of his actions is still unclear, George was criticised for eco-terrorism, and was said to have contravened UN conventions.

The big problem with DIY geoengineering, and any geoengineering for that matter, is its potential for danger: we don’t know what would happen. David Keith, a professor of engineering at Harvard who developed a giant air-sucking wall to capture carbon, told the New Yorker’s Michael Specter, “It is hyperbolic to say this, but no less true: when you start to reflect light away from the planet, you can easily imagine a chain of events that would extinguish life on Earth.”

On the other hand, carbon dioxide removal (CDR) doesn’t seem, on the face of it, like playing god with our weather systems or trying, fruitlessly, to find a dimmer switch for the sun. A company called Skyonics claims its Skymine process can capture harmful pollutants and turn them into marketable products such as baking soda and bleach.

But to what extent can sucking carbon out of the air work? Sabine Mathesius, a climate modeller at the Potsdam Institute for Climate Impact Research, wanted to see what CDR could achieve if five gigatons (an enormous, hypothetical amount) of carbon dioxide was removed from the atmosphere each year. Simulations found that the impact of this level of removal would not be significant at all, especially in terms of protecting the ocean, which is acidified by human-produced CO2.

“In the beginning I was surprised,” she said. “Like many people I also hoped that geoengineering could be a way to undo the harm we did with our CO2 emissions. But if you see how much CO2 we can get out of the atmosphere with the current technologies and what we are expected to emit in a business-as-usual scenario, you can already see that the impact of CO2 removal cannot be that big.”

CDR could be used as a supporting measure to avoid the worst scenario if emissions are reduced at the same time, Mathesius concluded. “What is not possible is just emitting the CO2 as usual and further expanding our industries and then using CDR to get the CO2 out of the atmosphere. Reducing emissions is the cheapest way to keep the CO2 levels low; and also the easiest way.” More promising technologies, such as bioenergy with carbon capture or artificial trees, would also require fertile land or would cost astronomic amounts, Mathesius says. So where then would she place her hope in terms of a techno-fix to solve climate change? “Clean energy to make it easier for people to emit less CO2.”

Carbon capture and storage gets short shrift from McKibben. “If you step back and think about it for a minute, it’s silly,” he says. “You can do it, obviously, but can you do it at a cost that makes any kind of sense? You can’t. No one’s been able to yet. You’re way better off just building the windmills in the first place. All it is is a solution designed to try and appease the power of the coal industry and offer them some kind of future.”

Those looking into this techno-fix are quite clear that solar radiation management or carbon capture is no substitute for reducing carbon emissions anyway. Bodies such as the Solar Radiation Management Governance Initiative (SRMGI) and the Royal Society contain wary caveats, that geoengineering is not an alternative to reducing carbon consumption. McKibben calls them an “absurd set of ideas where people throw up their hands and say, ‘There’s no way we can solve this problem, so instead let’s fill the atmosphere with sulphur’.”

On the last day of April, Elon Musk entered the stage at his Tesla Design Centre in Hawthorne, California to thumping dubstep, whoops and ripples of applause. The billionaire business magnate nodded to the crowd of adoring fans and set out his vision for a complete transformation of how the world works. His 20-minute speech explained how a new invention – the Powerwall battery – would advance a complete overhaul of the world’s energy infrastructure. “This is how it is today… it sucks,” Musk began, gesturing to slides depicting factories belching out smoke.

The solution to getting from fossil fuel hell to a renewable-powered future, he explained, was his new product. Because “existing batteries suck,” he had developed the Tesla Powerwall: a wall-mounted, household battery on sale for $3,500 (£2,300). His statements were punctuated by cheers and screams from the crowd, especially when he revealed that the whole event had been powered by solar and Powerwall.

Musk believes that transitioning to electric cars and solar energy will contain the worst effects of climate change. His electric cars are improving all the time; the mass-market model is expected to be ready before 2020. Tesla open-sourced all its patents and technology in 2014 to encourage other people to advance the electric vehicle industry; and lots of major names in the automobile world have followed with designs for electric cars. “We need the entire automotive industry to remake, and quickly,” said McKibben. Musk has also proposed the Hyperloop, a new transport system he describes as “a cross between Concorde, a railgun and a hockey table”.

Advances in batteries radically change the picture of renewable energy, electric cars and transport systems; and important improvements are happening. At the end of October 2015, a group of Cambridge scientists made a major breakthrough with a rechargeable super-battery that can hold five times more energy as those we’re used to and can power a car from London to Edinburgh on a single charge.

Improved battery storage will change everything for green energy enthusiasts like Daniel Connell in the next few years. “This is why, apart from [a lack of] political will, we don’t have renewable energy: because storage levels don’t reach grid level. But before the end of the decade they will,” he explains.

One of the projects chosen for POC21, the French eco-castle retreat, was a design by a team from Berlin. Sunzilla, a diesel generator without diesel, fuelled by the sun, can be assembled by anyone. Germany is leading the way in the energy revolution with its energiewende, driven by Green politicians and the support of local citizens. In 2014, just over a quarter of German energy came from renewable sources; in 2050, the goal is 80 per cent. The German Green Party politician Ralf Fücks, author of a new book called Green Growth, Smart Growth, is a techno-optimist with faith in society’s ability to find a way out of the ecological crisis, although he cautions against the hubris of large-scale techno-fixes. Investment in green technologies and renewable energies are more realistic, he writes, than carbon capture and storage.

Fücks speak slowly, carefully and with an obvious delight in the natural world. “Spider silk is a wonderful substance,” he says at one point. “It’s more flexible than rubber and more solid than steel and we now have the skills to discover [its] molecular composition.” He cites the smooth skin of the shark and the self-cleaning surface of the lotus blossom as examples of biological productivity we can learn from and use for our own purposes, while decreasing CO2 emissions.

But biomimicry is in its early stages, and renewables have already crossed to the point of no return, as Fücks puts it. On the plus side, though, costs for solar and wind power have decreased considerably over the last five years.

Fücks sees opportunities for young entrepreneurs and startups in a world without global celebrities such as Bill Gates or Richard Branson. The environmental reform of industrial society, in his view, demands a combination of big and small. There is room for more Elon Musks.

The world of food is fertile ground for big ideas and green tech innovation. Last summer saw the publication of new technology proposals to turn the waste shells of prawn, crab and lobster into nitrogen-rich chemicals for use, say, in pharmaceuticals, carbon sequestration and animal feed, which would avoid industrial production using fossil fuels.

Farmers, too, are innovating worldwide. In Devon, Rebecca Hosking is using new land management techniques to make a contribution to fighting climate change. She uses a grazing method that purposely locks atmospheric carbon back into the soil. Instead of ploughing, her long-grass grazing technique keeps carbon in the roots, ploughing release-carbon from soil into the atmosphere. The more organic matter there is in the ground, the more it can trap in the carbon.

“Once you lock it in, and as long as you don’t plough or let your grassland dry out, then the carbon stays in the soil,” she says. “You know that climate change is happening, we do our bit and suck out as much carbon as we can.”

This method, which French farmers are also keen to implement, is similar in the way it works to a new, low-methane, genetically modified rice. SUSIBA2, the new rice, uses smaller roots, and produces less methane, one of the chief greenhouse gases. Scientists have also developed a feed supplement for dairy cows that could reduce methane emissions by 30 per cent.

Global warming is posing serious challenges to water supply; and we all know that the melting of glaciers is one detrimental effect of climate change. Cue another climate hero: Chewang Norphel, an 80-year-old retired civil engineer, has made 12 artificial glaciers in the last 30 years to provide water for the people of Ladakh, India. The Ice Man, as he is called, realised he could divert water through canals into frozen ice sheets, which would melt in spring and provide water for irrigation, agriculture and general local use. “Getting water during the sowing period is the most crucial concern of the farmers because the natural glaciers start melting in the month of June and sowing starts in April and May,” he told online news portal the Better India.

Ocean farmers are also growing kelp again to encourage a move away from environmentally costly meat-based diets. Indeed, 3D ocean farming proponents GreenWave quote a study that found a network of seaweed farms the size of Washington state could provide all the dietary protein for the entire world population.

Pope Francis’s recent address sounded a note of caution around technology as a solution to climate change. “Our immense technological development has not been accompanied by a development in human responsibility, values and conscience,” he said.

Bill McKibben believes the key is solving the “structural systemic problem rooted in the balance of political power on our planet.” To make a difference, he says, an individual must “join with other people to build the kind of movement that can change those balances of power.” In Naomi Klein’s book This Changes Everything, she writes about the Hollywood action movie narrative that tells us that, at the very last minute, some of us are going to be saved: “Since our secular religion is technology, it won’t be god that saves us but Bill Gates and his gang of super-geniuses at Intellectual Ventures.”

But, while some techno-fixes recall the Greek hubris myth of Icarus, there is work to be done and hope to be found. Around the world, people are working to improve 3D printing technology and the usability of tutorials to explain how to make Connell’s DIY wind turbine or the German Sunzilla. Demand Logic, a company based in London, is using data to sweep big, commercial buildings in the city and work out where energy savings can be made.

Of the UN Climate Conference in Paris, McKibben says it will be most interesting to see whether countries will come up with the money to help poor countries leapfrog technologically. But he maintains that engineers and innovators are focusing their efforts in the right place, speeding up the transition from fossil fuels. Despite the Pope’s cautionary note, the industry of technology is crucial in the shift to a newly balanced planet. McKibben praised the good, cheap solar panels we already have, but said they could be much more efficient and easier to adopt. “There’s no shortage of crucial and interesting work for architects, engineers and financiers, and none of it requires telling yourself science fiction stories, the way that you have to if all you can think of is, ‘Let’s put a giant piece of film in space to block the sun’.”

This article originally appeared in The Long + Short, Nesta's magazine of innovation, new ideas and how the world is changing. Follow them on Twitter, @longshortmag.