Osborne in public: “I am not against Tobin taxes”; in private: “He remains unconvinced”

George Osborne yesterday repeated his opposition to a financial transaction tax during a debate with the 26 other EU finance ministers.

He said:

“I am not against financial transaction taxes. There is a financial transaction tax in Britain. There is a financial transaction tax on share trading, on equities. If we could agree a financial transaction tax globally that would be a good thing. But that’s not going to happen.

“The Commission itself points out that a European financial transaction tax would have a serious impact on European growth. It would hit the UK economy, it could reduce European GDP by up to 3.5 per cent.

“We have to be realistic and truthful to our publics about who pays this tax. There is not a single banker in this world who is going to pay this tax. There are no banks who are going to pay this tax. The people who will pay this tax are pensioners, with pensions.”

Of course, although Osborne claims that he wants a global FTT, it appears that he is lying through his teeth. In private, he is far less supportive, as letters Osborne wrote to financial leaders last week show.

City A.M. reported:

The chancellor appears to contradict his public stance that he is firmly in favour of a Tobin or financial transaction tax (FTT) if only there were support to impose it globally… Osborne assures them [the bankers] that “the necessary international consensus does not exist” to impose it.

Osborne added:

“Beyond this, I agree there would need to be further discussions about whether any FTT model offers an efficient mechanism to raise revenue.”

As City A.M. say:

The private reassurance to bankers that he remains unconvinced about even a global Tobin tax using “any FTT model”, despite his public support for one, will relieve many in the City but could leave him vulnerable to charges of hypocrisy.

Even if we ignore the fact that he’s arguing in bad faith, the inconsistencies are plain to see.

The Robin Hood Campaign elaborates:

• George Osborne’s position that it needs to be global to work is disingenuous. The best evidence that this is not the case is right here in the UK. Our unilateral FTT on shares raises more than £3 billion for the Exchequer each year without a significant loss of business from the UK. Several other countries including South Korea, India, US, South Africa and Brazil have also unilaterally implemented FTTs.

• The biggest threat to long term growth is not an FTT, but an out of control financial sector. According to the IMF for instance, indirectly, UK economic output fell by 27 per cent or £497 billion as a result of the systemic crisis precipitated in 2007.

• The FTT’s tax rate is set extremely low (an average rate of just 0.05 per cent) precisely to avoid having an impact on pensions and savings that carry out very few transactions. Such a rate would hit high frequency casino trading which is a completely distinct area of banking.

Of course, it is not surprising that Osborne is fighting tooth and nail to prevent one two-thousandth of the banking sector’s turnover being taxed. When Cameron was defending the UK’s refusal to implement an FTT, he quipped:

“I am sometimes tempted to ask the French if they would like a cheese tax!”

The Conservative view of Britain:

“Banking is as British as cheese is French.”

How did it come to this?

See also:

• 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

• A thousand economists agree on something – the Robin Hood Tax – Dominic Browne, April 14th 2011