‘Feral financiers’ need curbing: Corbyn guru

Reuters/LondonBritain’s economy is too dominated by “feral finance” and greater levels of regulation and taxation are needed to curb speculative activity by banks, says the man behind Labour leadership frontrunner Jeremy Corbyn’s economic policy.Labour is the middle of electing a new leader after its worst election defeat in nearly three decades in May. Veteran left-wing lawmaker Corbyn has risen from rank outsider to bookmakers’ favourite ahead of the result due on September 12.The victor of the contest is likely to be the main challenger to Prime Minister David Cameron’s Conservatives at the 2020 election and will be Labour’s face in a referendum on Britain’s European Union membership.In words that may chill some in Britain’s dominant finance industry, Corbyn’s economic guru, 57-year-old chartered accountant Richard Murphy, says the behaviour of banks, hedge funds and pension funds has had a destructive influence on the world’s fifth-largest economy.A financial transaction tax is needed to reduce market volatility, he told Reuters in an interview on Thursday.“Let’s look at the penalties that have been imposed, let’s look at the activities that have been undertaken, let’s look at the mis-selling that has occurred. Is it, in that context, unfair to use the term feral finance? No. Has finance clearly been out of control? Yes,” Murphy, who has known Corbyn for a decade, said.“Some changes to the role of the city are going to be absolutely fundamental ... There would have to be a separation of investment activity from real banking activity. There would have to be additional taxation of financial speculation.”Britain has become an “offshore treasure island” for financial services, Murphy said, adding that low tax and light-touch regulation mean it is now seen as a “pariah state” by other countries such as the US.Asked about the risk to London’s position as the only financial centre to rival New York if a tougher stance prompts major international banks to relocate, Murphy said: “That’s fine ... if you wish to, please go.”An admirer of Karl Marx, 66-year-old Corbyn has called for the railways, postal services and energy networks to be re-nationalised. He opposes the government’s spending cuts and plans to create a national investment bank.Murphy has promoted some of Corbyn’s most eye-catching ideas, including “People’s Quantitative Easing” which would see the Bank of England buy bonds issued by the national investment bank and local authorities to invest in projects such as housebuilding, transport infrastructure and renewable energy.While he favours greater corporation tax on big businesses as they are “sitting on very large piles of cash”, Murphy says a Corbyn government would be very small-business friendly.Murphy says finance minister George Osborne’s plan to wipe out Britain’s budget deficit and achieve a surplus by the end of the decade risks pushing Britain into recession and the government should be spending more, not less.“The private sector is not going to meet the needs of this economy ... and therefore the government has got to stand in place,” he said. “There is no reason to worry about a deficit, it is just complete nonsense ... if we haven’t got excessive inflation, we can run deficits.”If Osborne’s plan works and Britain sees steady growth, big increases in business investment and rising income, the chances of Corbyn becoming prime minister are pretty low, he admits.“But if he fails, and I think he will, is there going to be prime minister Corbyn? Yes I think there will be.” Britain’s opposition Labour Party faces annihilation if it elects hard left lawmaker Jeremy Corbyn as its next leader, former prime minister Tony Blair said yesterday, urging party members not to back “policies from the past”.Voting begins today in a four-way leadership contest triggered by a crushing election defeat in May. Opinion polls show Corbyn, who wants to steer the party sharply back towards its socialist roots, has a large lead over his rivals.Writing in the Guardian newspaper Blairwarned that the prospect of Corbyn-led party had put Labour in “danger more mortal today than at any point in the over 100 years of its existence”.“The party is walking eyes shut, arms outstretched, over the cliff’s edge to the jagged rocks below,” he wrote.“If Jeremy Corbyn becomes leader it won’t be a defeat like 1983 or 2015 at the next election. It will mean rout, possibly annihilation.”The stark intervention is Blair’s second in the leadership race, having previously told supporters that elections could not be won from a left-wing platform.“Jeremy Corbyn doesn’t offer anything new,” Blair wrote. “These are policies from the past that were rejected not because they were too principled, but because a majority of the British people thought they didn’t work.”