The Staggers

The New Statesman’s rolling politics blog

The real reason the UK fears an EU Tobin tax

French farmers are set fair to do well out of an European Tobin tax.

By Richard Morris Published 18 November 2011 11:23

Sometime today, in a conference room in Berlin, David Cameron will indulge in a certain amount of spleen venting. No doubt a little tapping pointedly on the table will take place. Who knows, maybe he'll even advise his interlocutor to "listen to the Doctor dear".

And then with a bit of luck, Angela Merkel, bedecked in Lincoln Green, will lean over the table, and whisper "But David. I thought we were all in this together?"

What will have brought all this unpleasantness to pass? Why it's that new favourite wheeze of German and French politicians: the Tobin Tax.

Now, the Tobin tax is that strangest of beasts, a popular levy. One that the public would welcome with open arms. So how come we have the German Chancellor offering to take from the rich to give to the poor, while Cameron, Osborne, Balls and Cable all scramble to play the Sheriff of Nottingham, shouting "no, no, no"?

When all three major parties pass up the opportunity of a populist open goal, you know there must be more to this than meets the eye. And there is.

Firstly - and it would be easy to miss this -- the Lib Dems, Tories and Labour are all actually in favour of the Tobin tax. Everyone thinks it's a grand plan. Just not right now. And not in the form the Merkozy axis has proposed.

"Give me a Tobin tax and fiscal continence. But not yet," they are saying, in a St-Augustine-sort-of-a way.

So what's the problem?

Well the financial implications to London have been extensively written about already.

But there's another issue: French farmers.

No, really.

Of course, it's not just Normandy cheesemakers and the like. It's every other thing the EU spends money on -- though with large parts of the total EU budget going on the Common Agricultural Policy, French farmers are set fair to do well out of an EU wide Tobin tax.

How come? Because as things stand, revenue raised from The City of London would go, not to the Treasury, but to Brussels. You can write your own Daily Mail headlines, can't you? I expect Paul Dacre already has.

And that's the nub of the problem. With 70 per cent of its potential revenue coming from the UK, even the most pro-European British politicians fear that the Tobin tax, excellent idea though it is, may prove rather less popular with the British public when they see what the money is being spent on.

Because given the state of the Eurozone, Angela Merkel knows we're all in this together. But some of us are in it rather more than others.

Richard Morris blogs at A View From Ham Common, named Best New Blog at the 2011 Lib Dem Conference.

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17 comments

Fri, 2011-11-18 20:21 — Daniele1

This article sounds like crude anti-Europe propaganda , style "Daily Mail" to me.It wouldn't be out of place in a UKIP propaganda leaflet.
So let's say the money goes to Brussels, what is wrong with that? It is as if Britain gets nothing out of the EU. French farmers? What about British farmers, don't they get anything from the Eu, including our very own Prince Charles if I am not mistaken?
The truth of the matter is, contrary to what is said in this light weight article,that Cameron and his mate don't want this tax because it would be a tax on the rich (including themselves), a tax on the world of bankers and finance and we can't have that, can we?
the fact that some other right wing European leaders such as Merkel and Sarkozy are in favour of it shows how right wing and sold out to the rich, this government truly is.
And I do not believe that 70% of these financial transactions take place in London.That is a load of rubbish and part of a rubbish article, bent on raising more hate towards other Europeans as if we didn't have enough.

Fri, 2011-11-18 21:53 — Eddy S (not verified)

the bottom line is the germans are not willing to bail out the debts of spain, italy, greece and maybe even france. the markets can see this as can anyone with a bit of sense.

the germans are not willing to see the ECB buying all this govt debt from these countries. a transaction tax is a diversion tactic pure and simple.

they will still have major problems but don't want to address the underlying problem as the truth is too difficult to stomach.

Fri, 2011-11-18 22:03 — Richard Morris (not verified)

@Danielle oh dear. I wasn't making an anti Europe point at all. I was trying to explain one of the reasons why politicians of all parties won't agree to an EU wide Tobin tax - - fear of Daily Mail type headlines and resultant voter fury.
Does that help?

Sat, 2011-11-19 00:15 — mcquade

"Otherwise, this seems, well, a bit patronising?"

Standard behaviour for a Lie Dem, Mike.

Sat, 2011-11-19 02:10 — Daniele1

Richard morris:No need to patronize me with "oh dear".
Just maybe what you mean in your article is muddled and unclear.
If the politicians of all parties,as you claim, disagree with that tax because of the bloody "Daily Mail", then politics in Britain is really in a bad way.Democracy is a farce and we are heading for a "mediacracy".
I personally think they are more concerned with not upsetting the City,the City being the puppet master of all the British political parties.
Whatever the reason, it is dishonourable and another piece of evidence that we, the ordinary citizens, are being betrayed by the political class which is supposed to represent us.

Sat, 2011-11-19 12:49 — Richard Morris (not verified)

@danielle I wasn't being patronising, I was trying to be genuinely helpful.

For what it's worth, the official spokesperson for the Robin Hood tax is written in the new statesman today. He makes the same point as me - probably more clearly. It's paragraph 8. Here's the link

http://www.newstatesman.com/blogs/the-staggers/2011/11/tax-financial-osb...

I think we both think this tax is a good idea. It's just agreeing the best way of making it real.

Sat, 2011-11-19 13:05 — johnt12free (not verified)

This has gone on a long time. It’s obviously a popular idea with the majority of people, to take from those who might be slightly inconvenienced and give to those whose lives could be dramatically improved and even saved. If the chiefs are really afraid that the big money men and women will move their business elsewhere, I say let them try it. The people can then move their savings and investments into those companies that stay and pay their way.

Sun, 2011-11-20 23:00 — Hugh Markey (not verified)

The Non-Doms must be having a distorting effect on the UK economy. At the apex of the multi-million pound housing market the nom-dom is king of the castle.
Again flouting economic lawa, soccer football clubs also come within the domain of the non-dom. The non-dom can hardly be outside UK society - having a neutral effect upon all things British.
The UK housing market and the soccer world are artificially affected by these non-subjects of Her Majesty the Queen.
How does David Ricardo's theory of comparative advantage play in this situation?

Fri, 2011-11-18 11:41 — Livers (not verified)

Just keep the two separate, surely?

We share revenue raised from VAT with our EU partners, can't the same principles apply to a FTT?

Fri, 2011-11-18 11:42 — Livers (not verified)

I mean't WE DON'T share revenue from VAT... ugh.

Fri, 2011-11-18 12:13 — Chir0n

I understand that people might begrudge the revenue raised by this tax going to "French farmers" but aren't most of the transactions brokered by The City transnational anyway? And aren't many of those deals transacted with countries outside the Eurozone?

So, if my assumptions are correct (and if anyone who actually knows what they're talking about can confirm or correct me, please do) and thinking along the same lines as @Livers, the revenue raised from deals transacted within the Eurozone could go to Brussels and the rest to Westminster. Plan?

Fri, 2011-11-18 12:16 — mike cobley (not verified)

Would have been nice if Mr Morris had backed up his assertion with a link or reference to relevant sources. Otherwise, this seems, well, a bit patronising?

Fri, 2011-11-18 12:37 — swatantra nandanwar

France is largely an agricultural country; Germany an indstrial manufacturing one, and we are neither, it mostly services and finance. They have their strengths and we have our weaknesses.
But I take the point that in the past butter mountains and wine lakes and setasides, have made the EU Common Agricultural Policies a laughing stock; and that must stop.
There has to be reform.

Fri, 2011-11-18 12:50 — Richard Morris (not verified)

@ Livers and @chir0n - this is indeed the nub of the problem and if it could be resolved would be great. The current proposal says fairly vaguely (because no one can agree):

" this proposal also aims at creating a new revenue stream with the objective to gradually displace national contributions to the EU budget, leaving a lesser burden on national treasuries"

but whether that displacement of contribution is proportional to contribution of the new tax is the main bone of contention which the UK is fighting Germany/France over.

The EU is going to publish separate proposals on this.

That's the precis; Here's the long version...

http://ec.europa.eu/taxation_customs/resources/documents/taxation/other_taxes/financial_sector/com(2011)594_en.pdf

Fri, 2011-11-18 12:52 — Richard Morris (not verified)

@Mike Cobley

Fair enough. I think you mean this.

http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/11/468&form...

Sat, 2011-11-19 17:24 — Buckskins (not verified)

I blame the Americans.

Mon, 2011-12-12 19:20 — elrob

Where is it written that the EU would take the UK tax and cuff it themselves?

Of course, that would be unacceptable. Unless say whatever is given to Frecnh Farmers as subsidies was equally goven to say British public servants to make up for their imminent loss of pensions; or perhaps, tot he housing deopartment to build the 300,000 homes a year we need for the next 20 years. That might do it.