Why Osborne is wrong on the Robin Hood Tax

The Chancellor has framed the debate as an EU attack on British prosperity. This does not stand-up.

George Osborne ripped back his well maintained veneer of ambivalence towards the Robin Hood Tax this week, revealing his true identity as the protector of the privileged few in City.

Having been given the advice of the IMF, Bill Gates and the European Commission who have all shown Financial Transaction Taxes (FTTs) are feasible, Osborne chose to ignore them, declaring instead it would be "economic suicide". But while his attempt to frame the debate as an EU attack on British prosperity may have superficial appeal -- John Major has made a similar attack today, claiming in the Guardian that an FTT would fan the flames of Euroscepticism -- it does not stand-up to economic scrutiny.

Let's start with the growth argument. Earlier this year, Osborne increased VAT (the transactions tax we all pay in the real economy) by 2.5 per cent to 20 per cent. VAT increases push up prices and are certainly not good for growth and they hit the poorest twice as hard as the rich. Yet now Osborne is casting a 0.05 per cent tax on the financial transactions of investment banks and hedge funds as bad for growth. The irony is of course, that as the IMF pointed out, financial transactions are VAT exempt.

The fact that a Robin Hood Tax would raise billions to protect jobs, services and the poorest was handily ignored. So too was the fact it would rein in rogue elements of the financial sector responsible for a crisis that will, according to the Bank of England, ultimately cost the UK at least £1.8 trillion and as much as £7.4 trillion in lost GDP. The biggest threat to our long term growth is surely an unrestrained financial sector and not a 0.05 per cent tax on their transactions. Any job losses are likely to occur in the exclusive corners of the investment banks a million miles away from high street banking.

Osborne's claim that not a single bank would pay this tax is plain wrong. The bit he did get right is that banks as intermediaries would not pay the tax, but the parties initiating the trades would. So who are initiating the trades? Er, it's the banks. And other financial institutions such as hedge funds who represent high net worth individuals and the richest segments of society. It's why the IMF has said an FTT would in all likelihood be "highly progressive": being paid by those most able to afford it.

More surprising than Osborne's offensive has been Vince Cable's amazing transformation. Cable himself has on a number of occasions supported the Robin Hood Tax, it's even in the Liberal Democrat manifesto. Until Wednesday that is, when he described it as a "tax on Britain", seemingly conflating the financial sector with the UK as a whole.

Worse still, Cable resorted to citing the infamous Swedish FTT from the 1980s. Focusing on this example, unique in its bad design, whilst omitting to mention the Stamp Duty on UK shares which successfully raises the Exchequer more than £3 billion a year, is disingenuous at best. It's a bit like showing us a picture of a square-wheeled bike as evidence that all bicycles are flawed, having just arrived by bike. The key to the Stamp Duty's success is the way it is levied; wherever in the world a UK share is traded - London, New York or the Cayman Islands - the tax still has to be paid.

Osborne and Cable were right about one thing however; no one wants all this money to disappear into the European coffers. A Robin Hood Tax has received such massive support -- from the UK public (who back it by two to one), the Archbishop of Canterbury, the Vatican and millions around the world -- not just because it would curtail casino capitalism but also because it would help tackle poverty and climate change at home and abroad.

Thankfully, the threat of co-option into a "Brussels tax" is overblown. As the Germans recently pointed out, each country would collect the tax nationally. Our campaign wants to see half the money spent helping poor countries and half (that's billions of pounds) spent protecting schools and hospitals, teachers and nurses at home. So, far from the size of the UK's financial sector meaning we have the most to lose from an FTT, we have the most to gain.

By ignoring the positives and exaggerating the negatives the government is compiling themselves a dodgy dossier of reasons not to back the Robin Hood Tax. In doing so they risk putting themselves at odds with public opinion and international momentum behind ensuring the financial sector pays its fair share.

Simon Chouffot is the Robin Hood Tax campaign's spokesperson

Simon Chouffot is a spokesperson for the Robin Hood Tax campaign and writes on the role of the financial sector in our society.

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When Theresa May speaks, why don't we listen?

Not many Prime Ministers have to repeat themselves three times. 

Theresa May is the candidate of Brexit and market panic. She ascended to the highest office because, in the fraught weeks after Britain’s vote to leave the European Union, she represented a safe haven for nervous Conservative MPs, the dependable family mutual that remained open while all along the Conservative high street, her rivals were shutting up shop.

Her popularity, as revealed in high poll ratings outside Westminster, too, owes itself to the perception that she is a serious politician in serious times, happily installed atop the ship of state to guide it through the rocky waters of Brexit negotiations.

May’s premiership has been defined by market panics of a different kind, however. The first is in the currency markets, where sterling takes a tumble whenever she pronounces on Britain’s future relationship with the European Union, falling both after her conference speech on 2 October and after her start-of-the-year interview with Sophy Ridge on 8 January. The second is in the opinion pages, where May’s stock oscillates wildly from bullish to bearish.

In the first months of May’s government, she was hailed as an Anglo-Saxon counterpart to Angela Merkel: a solid centre-right Christian democrat who would usher in a decade of conservative hegemony. More recently, she has been compared to Gordon Brown because of her perceived indecisiveness and repeatedly accused of failing to spell out what, exactly, her government’s Brexit objectives are.

In a symbol of the splits on the right between the Brexiteers and Remainers, the Economist, that bible of free-market globalisation and usually a reliable tastemaker as far as Westminster groupthink is concerned, began 2017 by dubbing the Prime Minister “Theresa Maybe”. Though May’s Downing Street is less concerned with the minutiae of what goes on in the public press than David Cameron’s, the contention that she is indecisive was a source of frustration.

There is an element of truth in the claim that May still views the world through a “Home Office lens”. One senior minister complains that Downing Street considers the Ministry of Justice as a “rogue outpost” of May’s old stomping ground, rather than a fully fledged department with its own interests and perspectives.

Yet even the most authoritarian of home secretaries would struggle to secure a conviction against May on the charge of opacity as far as her Brexit approach is concerned. She has hit the same grace notes with the reliability of a professional musician: Brexit means freedom from the jurisdiction of the European Court of Justice and control over Britain’s borders, two objectives that can only be achieved as a result of Britain’s exit not only from the EU but also the single market. This was confirmed on 17 January in the Prime Minister’s Lancaster House speech in London.

David Cameron used to say that he would never have “a people”. Certainly, there is no Cameroon tendency in the country at large to match the generation of council house residents that became homeowners and lifelong Conservatives because of Margaret Thatcher and Right to Buy. However, there is, unquestionably, a Cameroon people or faction to be found at almost every rung of London’s financial services sector or at editorial meetings of the Economist, though it as at the Times and the Sun where the treatment of May is at its most noticably rougher than in the Cameron era. 

Michael Gove, her old rival, is not only employed as a columnist by the Times; he enjoys the confidence and admiration of Rupert Murdoch. That the Times secured the first British interview with Donald Trump was a coup for Murdoch, an old associate of the president-elect, and for Gove, who conducted it. It left May in the unlovely position of making history as the first prime minister to be scooped to a first meeting with a new American president by a sitting MP in modern times. It also attested to a source of frustration among May’s allies that she is, for all her undoubted popularity, still ignored or doubted by much of the right-wing establishment.

That condescension partly explains why her words are often listened to briefly, acted on hastily and swiftly forgotten, hence the pound’s cycle of falling when she makes an intervention on Brexit and rising shortly thereafter. The Lancaster House speech was designed to break this pattern. Downing Street briefed the most potent paragraphs at the weekend so that the markets could absorb what she would say before she said it.

As a result, the pound rallied as May delivered her speech, which contained a commitment to a transitional deal that would come into effect after Britain has left the EU. Some financiers believe this arrangement could become permanent, which once again demonstrates how much they underestimate May’s ability to enforce her will.

Being underestimated by Cameron’s people, in Westminster and the City, has the unintended effect of shoring up Theresa May’s position. A prolonged and sustained bout of panic would increase the pressure for a soft landing, but its absence makes it harder for Labour to oppose her effectively, although it has largely acquiesced to the Tory plan for Brexit, at least as far as membership of the single market is concerned. 

Yet for all the plaudits that the Prime Minister’s Lancaster House speech attracted, for all her undoubted popularity in the country, she is in the anomalous position of being a Conservative Prime Minister who has priorities on the European stage other than the preservation of the City of London and to whom Rupert Murdoch is not a natural ally.

As such, she may find that her deadlier enemies come from the right.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.