Cypriot counterintution part one: "It was a good thing"

Should we be cheering one of the first wealth taxes of this millennium?

As the Cyprus saga continues, the interesting counterintuitive takes are starting to bubble up. Obviously there's a tendency, when so many people agree on the broad strokes of the news – that Cyprus is in a crap position, that the tax is pretty stupid, and that there's not a whole amount of other options – to go against the grain for the sake of it, but each of these arguments have merit to them.

First up is Philip Inman in the Guardian, who argues that we should ignore the "hysterical reaction" to the tax, because "it is a wealth tax – and about time too." Inman writes:

A wealth tax on bank deposits, where most wealth is held, is consequently a practical solution that also fulfils a basic economic need, which is to shift taxes away from income to wealth. Poorer citizens need to feed themselves, and a tax on incomes, especially for those with no savings, is the worst outcome.

It mimics an argument that was going around Twitter yesterday, pointing out that "a 1 [percentage point] rise in Sales Tax would be way more regressive and not even raise an eyebrow." Of course, it's questionable whether that increase increase in sales tax could raise quite as much as the tax on deposits, but that's even more of an argument in favour of the deposit tax.

The real hope for all of this, in fact, is that the Cypriot government will struggle through the negotiations and come out the other side with a deposit tax which applies entirely to deposits over €100,000. As Ben Hammersley tweeted:

 

 

Given that many of the wealthier depositors in Cypriot banks are engaged in questionable financial practices – and even outright money laundering, it seems – it's not a terrible thing to ask that the entire weight of the bailout be put on their shoulders. Of course, even if they weren't, it still wouldn't be that bad an idea, because putting the greatest burden on the broadest shoulders is almost the definition of a progressive tax system.

Except, of course, for the fact that the Cypriot economy benefits from its status as a financial haven. A rebalancing of the economy may still be a good thing for poorer Cypriots, but it's not clear that the hit the country is taking to pay off the ECB is bigger than the hit it would take if it scared away its questionably legal golden goose.

Interestingly, it seems that Cyprus agrees. France has confirmed, and credible reports indicate Germany and Finland back it up, that the negotiations with the Cypriot government only required it to implement a tax on deposits over the insurance threshold of €100,000. Insured deposits were considered sacrosanct to the Troika, but not to the Cypriot government, which needed to "spread the pain".

But the big reason why Inman's counterintuitive take is likely to remain counterintuitive is that a bank run for deposits above €100,000 – or even a bank stroll – is still a bank run. Deposit insurance lessens the chance of people trying to take all their money out, but it still happens, and it does nothing for the money you have above that value.

The chance of contagion is looking slim – although it is still the case that if you're a Portuguese depositor you're likely to be sitting markedly less comfortably than you were last week – but the situation in Cyprus itself is by no means solved yet. If the trust in the country's banks and politicians isn't restored, there will be worse ahead.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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