Osborne starts to panic about the chance of a Robin Hood Tax

Owen Tudor is the head of European Union and international relations at the TUC

The chancellor finally broke cover on the Robin Hood Tax at the European finance ministers’ meeting in Brussels yesterday. For months, the government line has been they support the impulse behind the policy – the prime minister said the same in response to the archbishop of Canterbury last week - but there are not enough other countries in favour for it to work.

George-Osborne It’s never been a particularly convincing line - last month the chancellor was reported to have given secret pledges to the banks a Robin Hood Tax would never happen - but his performance at the Ecofin meeting gave the game away once and for all.

He threw the kitchen sink at the idea, and trampled on the few remaining hopes he would side with the people rather than the banks.

Some of his arguments were procedural: there was no clear majority in the EU, the timetable was wrong, the details had not been worked out.

If he believed these to be problems, the right response would be to devote time and energy to building the coalition globally, and fine-tuning the detail so it has more in common with the unavoidable UK stamp duty rather than the late and unlamented Swedish transactions tax of the 1990s which is persistently raised even though the IMF has made clear it is no example of anything except the need to design taxes properly.

But in practice, we know from the chancellor’s behaviour yesterday, and reports from other world leaders about the government’s approach in the G20 discussions last week, that our political representatives have been obstructive and oppositional, rather than constructive and positive.

Some were either wilful misinterpretations of the proposal or flat out lies. For example, a Robin Hood Tax will not fall largely on pensioners; this was a completely new one on us - not once in 18 months of discussions with politicians or civil servants has anyone suggested this, which is strange if it’s one of the main problems with the proposal.

The tax would be set at such a low level it will barely impact on anyone who is not trading huge amounts of money on exotic financial products on a daily basis.

However, George Osborne’s 2.5 per cent VAT hike on virtually everything people buy on a daily basis impacts on ordinary people to the tune of hundreds if not thousands of pounds every year.

That’s also the problem with his concern about the impact of a Robin Hood Tax on growth.

The worst case scenario in a flawed European Commission impact assessment suggests a 0.5 per cent to 1.76 per cent impact on GDP over 20 years, and even the Commission accept that this assessment is highly speculative, based as it is on a highly contentious ‘Dynamic Stochastic General Equilibrium’ economic model. Contrast that with the already observable effect on growth of the VAT rise.

And finally, some of his arguments are the exaggerated hyperbole that is more familiar coming from the TaxPayers’ Alliance or UKIP. Apparently, George Osborne thinks the Robin Hood Tax would cost the EU economy over 500,000 jobs – the sort of figure the CBI once put on the impact of a national minimum wage, or indeed any social measure emanating from the European Union.

For the record, there are 1.6 million jobs in the UK finance sector, and, as in the rest of Europe, most of them are cashiers in retail banks, insurance salespersons and the like.

They don’t trade in complex derivatives or engage in high frequency trading – actually that’s mostly done by computers, whose idleness is not captured in the ILO unemployment count. Even in our wildest dreams, a Robin Hood tax will only make a few top city financiers unemployed, and if they’re as clever as their “masters of the universe” self-description suggests, they might be able to find other jobs.

European finance ministers yesterday agreed to ask the Commission to do more work on the detail of the draft directive. That - rather than George Osborne’s petulant hyperbole - was the right decision.

As Olaf Cramme recently wrote, it is preferable to be:

“…influenced by the grey EU technocrat in Brussels to being ruled by the 25-year old credit default swap trader in the City of London.”

See also:

• Osborne in public: “I am not against Tobin taxes”; in private: “He remains unconvinced” – Alex Hern, November 9th 2011

• On the Financial Transaction Tax, why is Osborne on the side of the one per cent? – Shamik Das, November 2nd 2011

• Miliband and Balls need to be more vocal in support of the Robin Hood Tax – Vaughan Gething AM, October 17th 2011

• Osborne increasingly isolated on Financial Transactions Tax – Owen Tudor, September 19th 2011

• Robin Hood Tax would lead to calmer markets – Simon Chouffot, August 6th 2011

http://twitter.com/mcdave73/status/134342853584367617 Dave McDave

Osborne starts to panic about the chance of a Robin Hood Tax http://t.co/LEMqfJr5
http://twitter.com/stevegpreston/status/134349554354094080 Steve Preston

Osborne starts to panic about the chance of a Robin Hood Tax, writes @OwenTUC: http://t.co/Jx5ThZ1c #RHT #FTT
http://twitter.com/comicbookkid1/status/134358835925233664 Comicbookkid

Osborne starts to panic about the chance of a Robin Hood Tax: Even in our wildest dreams, a Robin Hood tax will … http://t.co/6ig4VS0B
http://twitter.com/ilegal/status/134372662641303552 Patrick Torsney ✔

Osborne starts to panic about the chance of a Robin Hood Tax http://t.co/XIqlfrmO
http://twitter.com/fairtrial/status/134373652664811521 No Jury No Justice

Osborne starts to panic about the chance of a Robin Hood Tax http://t.co/XIqlfrmO
http://twitter.com/tyarian_v_cuts/status/134384093336055808 Ty Arian Solicitors

Osborne starts to panic about the chance of a Robin Hood Tax http://t.co/XIqlfrmO
http://twitter.com/creativecrip/status/134384951771660289 TheCreativeCrip

RT @leftfootfwd: Osborne starts to panic about the chance of a Robin Hood Tax http://t.co/MeThpX7H >> Leadership needed at G20 not excuses
http://twitter.com/revolution_info/status/134415360366620672 Révolutions Info

#29O Osborne starts to panic about the chance of a Robin Hood Tax (Left Foot Forward): Owen Tudor … http://t.co/6p3ZEN7K #GlobalChange
http://twitter.com/wtbdavidg/status/134470728128012289 David Gillon

RT @leftfootfwd: Osborne starts to panic about the chance of a Robin Hood Tax http://t.co/MeThpX7H >> Leadership needed at G20 not excuses
http://twitter.com/greekcynic/status/134480158496268288 Ann Lawson

Osborne starts to panic about the chance of a Robin Hood Tax, writes @OwenTUC: http://t.co/Jx5ThZ1c #RHT #FTT
Mark Stevo

The absence of a majority is a mere procedural issue for the TUC?
Mark Stevo

Incidently, EU would do well to Focus their efforts on more pressing matters, namely the impending collapse of the eurozone. Truely this is a case of fiddling while Rome burns.
http://twitter.com/labour52rose/status/134558746394370048 Alex Braithwaite

RT @leftfootfwd: Osborne starts to panic about the chance of a Robin Hood Tax http://t.co/wCci3Uho
http://www.timworstall.com Tim Worstall

“For example, a Robin Hood Tax will not fall largely on pensioners; this was a completely new one on us – not once in 18 months of discussions with politicians or civil servants has anyone suggested this, which is strange if it’s one of the main problems with the proposal.”

Owen, this is a best dissembling fomr you. At worst, outright lying.

I have been shouting at you for 18 months now that the most important part of the FTT is “tax incidence”. And I have similarly been shouting at you that you really do need to go off and find out about it. Something which you did say you would do.

And we know what the incidence of the stamp duty is. The IFS did a report on it years ago (a google for “incidence of stamp duty” should find it).

And that incidence is twofold: one, on pensioners. They investments have to pay the tax every time those investments are rebalanced. So of course the tax reduces gains over the years. Secondly, the tax makes capital more expensive for companies (ie, makes share prices lower than they otherwise would be: this impacts pensioners again). And it is that higher cost of capital for companies which reduces GDP. Obviously it will, a higher price for capital means less capital invested and less capital invested means lower GDP growth.

“The worst case scenario in a flawed European Commission impact assessment suggests a 0.5 per cent to 1.76 per cent impact on GDP over 20 years,”

Nonsense: they said 0.5 – 3.5%. The 1.76% is the mid point estimate.

“based as it is on a highly contentious ‘Dynamic Stochastic General Equilibrium’ economic model.”

So, which model have you at the TUC used to model the effects? You’re proposing the tax so you have done some modelling, haven’t you? You’ve not started advocating public policy pourely on the basis of prejudice or something, have you? You did get the wonks to run through the numbers, I mean of course you did. So, what is your estimate of the effect of making investment capital more expensive? What number did you reach…..and which model did you use to get to it?

“George Osborne thinks the Robin Hood Tax would cost the EU economy over 500,000 jobs – the sort of figure the CBI once put on the impact of a national minimum wage, or indeed any social measure emanating from the European Union.

For the record, there are 1.6 million jobs in the UK finance sector, and, as in the rest of Europe, most of them are cashiers in retail banks, insurance salespersons and the like.

They don’t trade in complex derivatives or engage in high frequency trading – actually that’s mostly done by computers, whose idleness is not captured in the ILO unemployment count. Even in our wildest dreams, a Robin Hood tax will only make a few top city financiers unemployed, and if they’re as clever as their “masters of the universe” self-description suggests, they might be able to find other jobs.”

More ignorant toss. The 500k isn’t the estimate of jobs lost in finance. It’s the estimate of jobs lost across the economy as a result of capital being more expensive for companies.

Dammit Owen, you’re the guy supposed to be promoting this new tax for the TUC. And you seem to know nothing about it and incapable of actually understanding other reports into it.

Seriously, what in buggery have you people done in researching the viability or usefulness of this tax? Given what you’ve shown us so far it looks like near bugger all. So why are you in fact promoting it when you’ve not even bothered to look into it?
http://twitter.com/wdjstraw/status/134613398519422976 Will Straw

Osborne's mask slips on #RobinHood tax. So much for Gov's in principle support as opposition announced to EU: http://t.co/P3TKbkU0
http://twitter.com/mjhsinclair/status/134616614653005824 Matthew Sinclair

Never occurred to TUC a tax that falls first on savers wd affect pensioners? Morons http://t.co/xxqFoWN5 @leftfootfwd
http://twitter.com/chadnoble/status/134616820412973057 Chad Noble

Never occurred to TUC a tax that falls first on savers wd affect pensioners? Morons http://t.co/xxqFoWN5 @leftfootfwd
http://twitter.com/seafarer1947/status/134617193257254912 KennyB

Never occurred to TUC a tax that falls first on savers wd affect pensioners? Morons http://t.co/xxqFoWN5 @leftfootfwd
http://twitter.com/robinhood/status/134617408961916929 Robin Hood

Osborne's mask slips on #RobinHood tax. So much for Gov's in principle support as opposition announced to EU: http://t.co/P3TKbkU0
http://twitter.com/robertseabury/status/134630918445998080 Robert Seabury

Osborne's mask slips on #RobinHood tax. So much for Gov's in principle support as opposition announced to EU: http://t.co/P3TKbkU0
http://twitter.com/jonslater74/status/134644161302376448 Jon Slater

A great analysis of the end of the Govts attempt to face both ways on the @robinhood tax http://t.co/AoGNYyO8
http://twitter.com/stevegpreston/status/134650750654615552 Steve Preston

RT @leftfootfwd: Osborne starts to panic about the chance of a Robin Hood Tax http://t.co/A2ZWSDoo
http://twitter.com/bbri439/status/134666398461992960 brian hocknull

Osborne's mask slips on #RobinHood tax. So much for Gov's in principle support as opposition announced to EU: http://t.co/P3TKbkU0
http://twitter.com/davidhomfray/status/134719255471067136 David Homfray

A great analysis of the end of the Govts attempt to face both ways on the @robinhood tax http://t.co/AoGNYyO8
Leon Wolfson

“I have been shouting at you for 18 months”

Yup, and you’re not either. You’re just loud and annoying.
http://twitter.com/robinhood/status/134966889188298753 Robin Hood

A great analysis of the end of the Govts attempt to face both ways on the @robinhood tax http://t.co/AoGNYyO8
http://twitter.com/joecassels/status/134967195917754368 Joe Cassels

A great analysis of the end of the Govts attempt to face both ways on the @robinhood tax http://t.co/AoGNYyO8
http://twitter.com/paulonyc/status/134968056010113025 Paul Silva

A great analysis of the end of the Govts attempt to face both ways on the @robinhood tax http://t.co/AoGNYyO8
http://twitter.com/gurtysnark/status/134971610892468224 Gurtysnark

A great analysis of the end of the Govts attempt to face both ways on the @robinhood tax http://t.co/AoGNYyO8
http://twitter.com/justinchaloner/status/134981565628416001 justinchaloner

A great analysis of the end of the Govts attempt to face both ways on the @robinhood tax http://t.co/AoGNYyO8
http://twitter.com/fki01/status/135002844381184001 James Ross

Excellent stuff, @leftfootfwd : Osborne flaps over Tobin: http://t.co/hyFhWtBC
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