UK to "resist" European plans for a Robin Hood tax

Britain looks set to scupper a financial transaction tax, saying it will unfairly affect London.

The UK government has reiterated that it will "resist" European plans to introduce a tax on financial transactions.

This comes after José Manuel Barroso, the European Commission president, unveiled the proposals as part of his annual State of the Union address in Strasbourg yesterday. He said that the tax could raise some €55bn (£50bn; $75bn) a year.

Under the proposals, the tax would be levied at a rate of 0.1 per cent on all financial transactions between institutions. Derivative contracts would be taxed at a rate of 0.01 per cent. Both parties would be charged, even if only one was EU-based.

It would be a popular measure with the public. A recent poll by Eurobarometer found that 61 per cent of Europeans support a financial transaction tax, including 65 per cent of Britons.

On Radio 4 this morning, Stuart Fraser of the City of London said that this would effectively be a "tax on London", as around 80 per cent of Europe's financial transactions come through the British capital. In the Financial Times, business groups such as the CBI have queued up to dismiss the plans, saying that they would simply divert transactions to Hong Kong and New York.

This is the line that the government has taken too. As I reported last month, the Treasury said it would not back such a tax unless it was adopted globally. Since global agreement is highly unlikely, the UK (which can veto it in the EU) could successfully scupper the tax. There is little doubt that the tax would be more successful if implemented across the world -- the European Commission concedes this -- but the UK government is not even willing to engage with the idea or seek global accord.

The BBC's business editor, Robert Peston, explains why the disproportionate effect on London might not necessarily be a bad thing:

Research by the Bank for International Settlements, the central bankers' central bank, provides a useful counterpoint. This demonstrates that countries with disproportionately large financial sectors, like the UK, have disproportionately small manufacturing sectors - because capital and talent tend to gravitate to the ostensibly big returns on offer in banks, hedge funds and so on, and because the exchange rate tends to rise to a level well above what's comfortable for exporters.

So, arguably, the British economy will not be rebalanced -- towards more making, and less financial engineering -- unless and until the City is less dominant. Which possibly means that a government committed to such rebalancing, as this one is, should not be quite so wary of a tax that would squeeze City profits.

Part of the thinking behind the tax is that it would force a culture change, limiting what Peston calls "deals that the world would be better off without". Unfortunately, it seems that the UK government is more concerned with defending a return to business as usual.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Why the Liberal Democrats by-election surge is not all it seems

The Lib Dems chalked up impressive results in Stoke and Copeland. But just how much of a fight back is it?

By the now conventional post-Brexit logic, Stoke and Copeland ought to have been uniquely inhospitable for the Lib Dems. 

The party lost its deposit in both seats in 2015, and has no representation on either council. So too were the referendum odds stacked against it: in Stoke, the so-called Brexit capital of Britain, 70 per cent of voters backed Leave last June, as did 62 per cent in Copeland. And, as Stephen has written before, the Lib Dems’ mini-revival has so far been most pronounced in affluent, Conservative-leaning areas which swung for remain. 

So what explains the modest – but impressive – surges in their vote share in yesterday’s contests? In Stoke, where they finished fifth in 2015, the party won 9.8 per cent of the vote, up 5.7 percentage points. They also more than doubled their vote share in Copeland, where they beat Ukip for third with 7.3 per cent share of the vote.

The Brexit explanation is a tempting and not entirely invalid one. Each seat’s not insignificant pro-EU minority was more or less ignored by most of the national media, for whom the existence of remainers in what we’re now obliged to call “left-behind Britain” is often a nuance too far. With the Prime Minister Theresa May pushing for a hard Brexit and Labour leader Jeremy Corbyn waving it through, Lib Dem leader Tim Farron has made the pro-EU narrative his own. As was the case for Charles Kennedy in the Iraq War years, this confers upon the Lib Dems a status and platform they were denied as the junior partners in coalition. 

While their stance on Europe is slowly but surely helping the Lib Dems rebuild their pre-2015 demographic core - students, graduates and middle-class professionals employed in the public sector – last night’s results, particularly in Stoke, also give them reason for mild disappointment. 

In Stoke, campaign staffers privately predicted they might manage to beat Ukip for second or third place. The party ran a full campaign for the first time in several years, and canvassing returns suggested significant numbers of Labour voters, mainly public sector workers disenchanted with Corbyn’s stance on Europe, were set to vote Lib Dem. Nor were they intimidated by the Brexit factor: recent council by-elections in Sunderland and Rotheram, which both voted decisively to leave, saw the Lib Dems win seats for the first time on massive swings. 

So it could well be argued that their candidate, local cardiologist Zulfiqar Ali, ought to have done better. Staffordshire University’s campus, which Tim Farron visited as part of a voter registration drive, falls within the seat’s boundaries. Ali, unlike his Labour competitor Gareth Snell and Ukip leader Paul Nuttall, didn’t have his campaign derailed or disrupted by negative media attention. Unlike the Tory candidate Jack Brereton, he had the benefit of being older than 25. And, like 15 per cent of the electorate, he is of Kashmiri origin.  

In public and in private, Lib Dems say the fact that Stoke was a two-horse race between Labour and Ukip ultimately worked to their disadvantage. The prospect of Nuttall as their MP may well have been enough to convince a good number of the Labour waverers mentioned earlier to back Snell. 

With his party hovering at around 10 per cent in national polls, last night’s results give Farron cause for optimism – especially after their near-wipeout in 2015. But it’s easy to forget the bigger picture in all of this. The party have chalked up a string of impressive parliamentary by-election results – second in Witney, a spectacular win in Richmond Park, third in Sleaford and Copeland, and a strong fourth in Stoke. 

However, most of these results represent a reversion to, or indeed an underperformance compared to, the party’s pre-2015 norm. With the notable exception of Richmond’s Sarah Olney, who only joined the Lib Dems after the last general election, these candidates haven’t - or the Lib Dem vote - come from nowhere. Zulfiqar Ali previously sat on the council in Stoke and had fought the seat before, and Witney’s Liz Leffman and Sleaford’s Ross Pepper are both popular local councillors. And for all the excited commentary about Richmond, it was, of course, held by the Lib Dems for 13 years before Zac Goldsmith won it for the Tories in 2010. 

The EU referendum may have given the Lib Dems a new lease of life, but, as their #LibDemFightback trope suggests, they’re best understood as a revanchist, and not insurgent, force. Much has been said about Brexit realigning our politics, but, for now at least, the party’s new normal is looking quite a lot like the old one.