By Vaughan Gething AM (Labour and Co-operative, Cardiff South and Penarth)
The ‘Robin Hood Tax’ – a tiny tax on financial transactions which could generate billions to fight poverty – may have seemed a far-fetched financial compensation dream only a few years ago.
Global debt relief used to be seen as a pipe dream – yet huge progress on that subject was made over the last decade. Over recent months Robin’s tax has gained global credibility, momentum and support and is only a step or two away from becoming a reality.
Labour should be at the forefront of arguing for its introduction. Robin’s tax could ensure that the poorest in Wales, the UK and abroad benefit massively, at the same time as helping shape a financial sector that works for society, not the other way around.
The idea of a tiny tax on financial transactions – such as trades in shares, bonds or currency - has been around for many years. It dates back to the original proposal for what was then called a ‘Tobin Tax’ more than thirty years ago.
Experts have shown that even a very small tax of as little as 0.05% could raise £250 billion globally per year. Nobody serious disputes that a tiny tax could raise huge and regular revenue sums.
Watch this short video to see how:
It would also help dampen the type of casino capitalism that has been described as “socially useless” by Adair Turner, head of the UK’s most powerful regulator, the Financial Services Authority. A real but obvious example of this ‘useless’ behaviour can be seen in the high-frequency trading markets, where traders often hold stocks for as little as 11 seconds.
Recent weeks have seen a flurry of activity – with a range of proposals being put on the table. These range from a new draft law proposed by the European Commission – a joint proposal from right wing administrations in Germany and France – and there is even a bill being introduced in the US Senate.
At the same time, 1,000 leading economists have given their backing, countries from Finland to Spain across Europe have made their support clear together with rising global economic players like Argentina; Bill Gates has spoken of the importance of using the resources raised by such a tax to tackle poverty and global challenges like climate change.
But despite this wide coalition of support, chancellor George Osborne has said he will fight the European proposals for a financial transaction tax and insists that the idea will only work if adopted globally – whilst doing nothing to ensure this happens.
The insistence on a global tax scheme is a poorly veiled excuse to disguise a desire to do absolutely nothing at all. It wasn’t long ago at all that Osborne and Vince Cable were calling for bankers to be made to pay for the global financial crisis they helped to create.
Labour needs to come out and tackle the UK government’s misleading claim this is just a ‘Brussels tax’.
The tax is in fact being discussed primarily in the G20, rather than the EU. In any case there is no need for the revenues from a European tax to be paid to the EU budget (as the EC has proposed). Supporters of the tax like Germany have in fact argued strongly against this proposal.
Britain could benefit enormously from the revenues of a uniform EU tax paid at a national level, given the size of the City of London and the UK financial sector. The honest truth is that major financial players need to have bases in Europe.
These are not business that will flit from one jurisdiction to another in the way that some manufacturers race to the bottom for ever lower wages. Wage restraint is after all not a feature of global financial institutions.
We could use the resources form an international tax collected nationally here at home to tackle the impact of the financial and economic crisis on the poorest and most vulnerable. We would still then have significant sums left over for us to remember our responsibilities to the poorest abroad.
The UK already has one of the oldest and most successful financial transaction taxes in operation – stamp duty on share transactions – which raises almost £4 billion per year. Arguments against introducing a Robin Hood Tax look increasingly like the result of furious lobbying from London financiers.
Ed Miliband has already indicated his broad sympathies for introducing the tax – but he should now go further and give it his unequivocal backing with a national collection mechanism. He and shadow chancellor Ed Balls should be putting pressure on George Osborne and David Cameron to go to next month’s G20 summit in France as leaders, not laggards.
How Labour accounts for its policies on the financial sector while in government is an important debate to be had. However, it is even more important the party has a clear view on the sort of financial sector we want to see in the future.
When one estimate has shown total global profits and bonuses for all banks in 2011 are still likely to be between $600bn and $1 trillion, supporting a tiny tax on their transactions is a fair way forward. The alternative is that ordinary people pay more in taxes including increased VAT. Ed Balls has rightly argued the coalition’s VAT rise is regressive and hurts the poorest most. Before the election even David Cameron agreed VAT is regressive.
The UK government needs to rethink its position on this tax urgently as we approach the crucial G20 summit in France next month.
The Labour leadership needs to demonstrate in practical terms how our progressive values translate into action. This is an opportunity to do just that.
Labour should be bold in piling on the pressure by joining the band of ‘merry’ men and women backing the Robin Hood Tax.
• Bill Nighy wants me in his latest movie. And he asked me to ask you, too – Owen Tudor, September 25th 2011
• Osborne increasingly isolated on Financial Transactions Tax – Owen Tudor, September 19th 2011
• A thousand economists agree on something – the Robin Hood Tax – Dominic Browne, April 14th 2011
• Socialists win double victory on financial transactions tax and short selling – Ben Fox, March 8th 2011
• Robin Hood Tax campaign goes live – Owen Tudor, February 10th 2010