sam boyd | politics

Tobin Tax: Osborne’s deceit

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19 November 2011

George Osborne has always said that a financial transactions tax (FTT, or the Tobin, or Robin Hood tax) would only work with global support. As Germany pushes for the FTT to apply solely across Europe, Osborne wrote in the London Evening Standard last week that,

“The ideas of a tax on mobile financial transactions that did not include America or China would be economic suicide for Britain and for Europe.”

This position infuriates the Germans. A senior ally of Chancellor Merkel said he would not let the “British get away” with “only being after their own benefit and refusing to contribute”.

But there is little doubt that a Europe-only FTT would glean a large chunk its revenue from the UK. A “bullet aimed at the heart of London”, as Osborne described it, is a powerful argument in the circumstances. Although raising the money to bail out failing European economies is clearly in our interest too, the UK stayed out of the euro – it seems unfair to demand we foot most of the bill for its failure. John Major upped the hyperbolic militaristic metaphor stakes yesterday, describing the proposed FTT as a “heat-seaking missle” directed at the City.

As ever, we’re also informed that bankers would simply abandon London for somewhere more tax-friendly and deserty. But the mass exodus argument never seems very convincing to me – if Dubai is such a haven for British financiers, why haven’t they all jumped ship already? Don’t they know we tax the rich at 50 percent here? Of course, they do – it’s just that bankers have families too. Maybe they even like living in the UK.

In September, a treasury spokesperson spelled out the official line on the FTT:

“The government will continue to engage with its international partners on Financial Transaction Taxes and has no objection to them in principle. But any financial transaction tax would have to apply globally”

David Cameron emerged from his meeting with Merkel yesterday saying “a global tax would be a good thing”. I agree. The rhetoric is clear: Osborne would apply the FTT if it could be agreed upon globally. Except, he wouldn’t. In a letter penned to bank chiefs last week, the chancellor wrote of the financial transaction tax:

“The necessary international consensus does not exist … Beyond this I agree there would need to be further discussions about whether any FTT model offers an efficient mechanism to raise revenue.”

Alas, the truth: even with international consensus, he wouldn’t back the tax. At least we now know how to unearth some honesty from Mr. Osborne: pay attention to what he tells the City, not what he tells the rest of us.

Simon Chouffot of the Robin Hood Tax campaign points out that Osborne was all too happy to hike VAT by 2.5 percent, a move that hits the poorest hardest with inflated prices, depletes spending power, and so stifles growth. Yet, he refuses to countenance a 0.1 percent tax on City stock and bond trades and 0.01 percent on derivatives, on the grounds that it would “undermine growth”.

Contrary to the VAT rise, a globally-applied FTT would be popular, progressive, and represent at long last a form of payback from the City for the almighty mess in which we find ourselves. Far from curtailing growth, the money raised could fund infrastructure projects and new jobs for young people, stimulating the economy and rebalancing it away from the City. But, tellingly, Osborne makes no attempt to sell the idea on the global stage. Now we know why: he doesn’t want to.

Nor does he take action on obscene bonuses and astronomical executive pay, or on significantly reducing carbon emissions; two themes the Tories enjoyed playing up at election time, but from which they now shirk away in thrall to the sacred City cow. The fact that Cameron and Osborne make little attempt to reduce our economy’s over-reliance on finance is unsurprising, of course, given the extent to which it funds the Tory party.

But if the prime minister and chancellor see themselves as problem-solving statesmen in a time of crisis, which they surely do, then they should take a lead on the vital issues they regularly claim to support: building a worldwide consensus for the FTT, tackling climate change, solving the eurozone debt crisis, and rebalancing our economy. I, for one, am not holding my breath.

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Written by Sam Boyd

November 19, 2011 at 12:57 pm

Posted in Politics

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