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.

GARY WATERS
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In defence of expertise: it’s time to take the heart out of “passionate” politics

What we need is cool logic.

We are living through a bonfire of the experts. During the EU referendum campaign, Michael Gove explained that people had had enough of them. A few weeks later, his fellow Tory MPs took him at his word and chose a relative ingénue to run against Theresa May.

After declaring for Andrea Leadsom in the Tory leadership race, Michael Howard was asked whether it might be a problem that she had never held a position higher than junior minister. Howard, whose long career includes stints as home secretary and opposition leader, demurred: “I don’t think experience is hugely important.”

Even in this jaw-dropping season, that comment caused significant mandibular dislocation. I thought: the next Tory leader will become prime minister at a time of national crisis, faced with some of the UK’s most complex problems since the Second World War. If experience doesn’t matter now, it never does. What does that imply about the job?

Leadsom’s supporters contended that her 25 years in the City were just as valuable as years spent at Westminster. Let’s leave aside the disputed question of whether Leadsom was ever a senior decision-maker (rather than a glorified marketing manager) and ask if success in one field makes it more likely that a person will succeed in another.

Consider Ben Carson, who, despite never having held elected office, contested the Republican presidential nomination. He declared that Obamacare was the worst thing to happen to the United States since slavery and that Hitler may have been stopped if the German public had been armed. Yet Carson is not stupid. He is an admired neurosurgeon who pioneered a method of separating conjoined twins.

Carson is a lesson in the first rule of expertise: it does not transfer from one field to another. This is why, outside their domain, the most brilliant people can be complete dolts. Nevertheless, we – and they – often assume otherwise. People are all too ready to believe that successful generals or entrepreneurs will be good at governing, even though, more often than not, they turn out to be painfully inept.

The psychologist Ellen Langer had her subjects play a betting game. Cards were drawn at random and the players had to bet on whose card was higher. Each played against a well-dressed, self-assured “dapper” and a shabby, awkward “schnook”. The participants knew that it was a game of chance but they took more risks against the schnook. High confidence in one area (“I’m more socially adept than the schnook”) irrationally spilled over into another (“I’ll draw better cards”).

The experiment points us to another reason why we make poor judgements about competence. We place too much faith in social cues – in what we can see. As voters, we assume that because someone is good at giving a speech or taking part in a debate, they will be good at governing. But public performance is an unreliable indicator of how they would cope with running meetings, reading policy briefs and taking decisions in private. Call it the Boris principle.

This overrating of the visible extends beyond politics. Decades of evidence show that the job interview is a poor predictor of how someone will do in the job. Organisations make better decisions when they rely on objective data such as qualifications, track record and test scores. Interviewers are often swayed by qualities that can be performed.

MPs on the Commons education select committee rejected Amanda Spielman, the government’s choice for the next head of Ofsted, after her appearance before them. The committee didn’t reject her because she was deficient in accomplishments or her grasp of education policy, but because she lacked “passion”. Her answers to the committee were thoughtful and evidence-based. Yet a Labour MP told her she wasn’t sufficiently “evangelical” about school improvement; a Tory asked her to stop using the word “data” so often. Apparently, there is little point in being an expert if you cannot emote.

England’s football team is perennially berated in the media for not being passionate enough. But what it lacks is technique. Shortly before Wales played England in the European Championship, the Welsh striker Gareth Bale suggested that England’s players lacked passion. He knew exactly what he was doing. In the tunnel before kick-off, TV cameras caught the English goalkeeper Joe Hart in a vessel-busting frenzy. On the pitch, Hart allowed Bale to score from an absurdly long range because he was incapable of thinking straight.

I wish there were less passion in politics and more cool logic; less evangelism and more data. Unthinking passion has brought the Labour Party to its knees and threatens to do the same to the country. I find myself hungering for dry analyses and thirsting for bloodless lucidity. I admire, more than ever, those with obscure technical knowledge and the hard-won skills needed to make progress, rather than merely promise it.

Political leadership is not brain surgery but it is a rich and deep domain. An effective political leader needs to be an expert in policy, diplomacy, legislative process and how not to screw up an interview. That is why it’s so hard to do the job well when you have spent most of your time in boardrooms or at anti-war rallies.

If democratic politicians display contempt for expertise, including their own, they can hardly complain if those they aspire to govern decide to do without the lot of them. 

Ian Leslie is a writer, author of CURIOUS: The Desire to Know and Why Your Future Depends On It, and writer/presenter of BBC R4's Before They Were Famous.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt