Comment by specproc
9 days ago
Not sure why this was downvoted, maybe the use of "foreigners" is a bit loaded, but this is basically it.
Every inch of our economy is now owned by some faceless fund. All serious capital generated in the country is extracted out into the pockets of fund managers and Californian pensioners.
We're screwed until we can stem the outflow. I always thought taxing money leaving the country might be interesting way to approach the problem.
It’s true that too much of the U.K. is a piggy bank for those who don’t live there, but that is true of much of the West now.
> taxing money leaving the country might be interesting way to approach the problem.
This would end very poorly because what the U.K. sorely needs is investment (to create new productive capacity). For example, Americans invested huge sums in North Sea oil and created an entire industry (before we destroyed it). Conversely, if you force people to keep wealth in the country then you just make things more expensive: they will bid up the price of property and the like. Nothing is added to the UK’s real economy by increasing the number of pounds flowing around in it - it’s only helpful if it’s invested. So what you actually want is tax breaks for foreign investment, but with some kind of ownership cap.
The problem is that the investment in this day and age is entirely extractive. Strip the assets, do minimal infra, and jack up the prices. Water here is a classic example. Investors want their returns, and the best way to get it is by rent-seeking and minimal outlay. I'd go so far to argue that "investment" is the problem.
There's been enough in the way of tax breaks and "derisking". A huge part of the problem with our public finances is being on the hook for some very ill-advised "investments".
The money going out exceeds the money going in, because that's what an investment is. An opportunity to make money.
What you are describing, from the POV of the British firm, is ownership, not investment. Water is a classic example of failure because there was no shareholder capital invested - exactly my point. We don’t talk about all the successful investments because they’re doing just fine.
What the UK desperately needs is actual shareholder capital actually being invested into British companies, so that they can create new wealth. They are welcome to take a share of the wealth they create! Everybody wins!
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The response of "we cannot stop water companies dumping raw sewage into our rivers and lakes because it might impact profits of their Saudi Arabia investment funds" is really all we need to know about the issues. It's sickening.
This is not true. There is no Saudi ownership of Thames Water. 90% or so is owned by Australian, European, and Canadian pension funds. Specifically it was the Macquarie Group (Australian) that loaded it up with debt and pushed it off a cliff.
>I always thought taxing money leaving the country might be interesting way to approach the problem.
Even China with extreme capital controls and pervasive surveillance can't stop money leaving the country. Unless the UK was willing to go fully authoritarian and ban its citizens from spending money overseas, and ban crypto (and build all the internet firewall/DPI infrastructure that doing so would require), it wouldn't stand a chance. And attempting to do so would destroy the value of the pound, because nobody with any options would want to hold a currency that could only be spent in the UK.
Surely you see the difference between ordinary citizens buying online and spending money abroad while on holiday and big foreign companies taking their billions of profits out of the country?
Go learn what dividend, royalty and interest withholding taxes are.
> I always thought taxing money leaving the country might be interesting way to approach the problem.
Capital controls. By the time they are applied it's always too little, too late, and they only ever apply to the plebs -- the wealthy always have ways to move money out (and back in, later -much later-, if it becomes necessary or advantageous). Always too little too late because -I suspect- capital controls don't really work -- not against the wealthy.