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.

Photo: Getty
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Labour's purge: how it works, and what it means

The total number of people removed will be small - but the rancour will linger. 

Labour has just kicked off its first big wave of expulsions, purging many voters from the party’s leadership rolls. Twitter is ablaze with activists who believe they have been kicked out because they are supporters of Jeremy Corbyn. There are, I'm told, more expulsions to come - what's going on?  Is Labour purging its rolls of Corbyn supporters?

The short answer is “No”.

If that opener feels familiar, it should: I wrote it last year, when the last set of purges kicked off, and may end up using it again next year. Labour has stringent rules about expressing support for other candidates and membership of other parties, which account for the bulk of the expulsions. It also has a code of conduct on abusive language which is also thinning the rolls, with supporters of both candidates being kicked off. 

Although the party is in significantly better financial shape than last year, it still is running a skeleton staff and is recovering from an expensive contest (in this case, to keep Britain in the European Union). The compliance unit itself remains small, so once again people from across the party staff have been dragooned in.

The process this year is pretty much the same: Labour party headquarters doesn’t have any bespoke software to match its voters against a long list of candidates in local elections, compiled last year and added to the list of candidates that stood against Labour in the 2016 local and devolved elections, plus a large backlog of complaints from activists.

It’s that backlog that is behind many of the highest-profile and most controversial examples. Last year, in one complaint that was not upheld, a local member was reported to the Compliance Unit for their failure to attend their local party’s annual barbecue. The mood in Labour, in the country and at Westminster, is significantly more bitter this summer than last and the complaints more personal. Ronnie Draper, Ronnie Draper, the general secretary of the Bfawu, the bakers’ union, one of Corbyn’s biggest supporters in the trade union movement, has been expelled, reported for tweets which included the use of the word “traitors” to refer to Labour opponents of Corbyn.  Jon Will Chambers, former bag carrier to Stella Creasy, and a vocal Corbyn critic on Twitter, has been kicked out for using a “Theresa May” twibbon to indicate his preference for May over Andrea Leadsom, in contravention of the party’s rules.

Both activities breach the letter of the party’s rules although you can (and people will) make good arguments against empowering other people to comb through the social media profiles of their opponents for reasons to dob them in.  (In both cases, I wouldn’t be shocked if both complaints were struck down on appeal)

I would be frankly astonished if Corbyn’s margin of victory – or defeat, as unlikely as that remains in my view – isn’t significantly bigger than the number of people who are barred from voting, which will include supporters of both candidates, as well as a number of duplicates (some people who paid £25 were in fact members before the freeze date, others are affliated trade unionists, and so on). 

What is unarguably more significant, as one party staffer reflected is, “the complaints are nastier now [than last year]”. More and more of the messages to compliance are firmly in what you might call “the barbecue category” – they are obviously groundless and based on personal animosity. That doesn’t feel like the basis of a party that is ready to unite at any level. Publicly and privately, most people are still talking down the chances of a split. It may prove impossible to avoid.

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.