The City of London publishes regular reports showing the sector’s “contribution” to the British economy, in terms of taxes paid and jobs created. The Finance Curse analysis shows these numbers to be useless — for the simple fact that they show a gross contribution, airbrushing out the costs, instead of what policy-makers need: the net contribution, after the costs of oversized have been taken into account.
The first systematic attempt to put a number to the net figure was by Andrew Baker, Gerald Epstein and Juan Montecino. They came up with a negative number: oversized finance has cost the UK economy a cumulative $4.3 trillion over 20 years.
And there’s another question here: are the gross figures put forward by the City of London even correct?
A new article by Prof. Prem Sikka shows that the published tax benefits issued by the City of London are enormous overstatements. Read his article here. He begins:
“The sector claims to have contributed 11% of the UK tax revenues compared to 13.9% in 2007. The report was prepared by PricewaterhouseCoopers (PwC), the firm that audited BHS and was also carpeted by the Public Accounts Committee for promoting tax avoidance “on an industrial scale”.
And the article lays out the several reasons how and why the tax numbers are wildly overstated.
For more details, also see my earlier paper co-authored with John Christensen and Duncan Wigan of Copenhagen Business School.
Postscript: in a tangentially related matter, Sikka has just published a set of proposals for reforming the auditing industry, and particularly removing their conflicts of interest.