Leaked EU FTT will likely hit the City too, whether we want it or not

If you can't beat them, maybe you should think about joining them?

The Financial Times' Alex Barker has seen a draft version of the financial transaction tax which is to be implemented by 11 euro area nations, and writes that it:

casts a wider net than expected by adding anti-avoidance measures to the original plan for an EU-wide levy, so that financial business does not decamp to safe havens.

The plan will levy a 0.1 per cent tax on stock and bond trades, and a 0.01 per cent tax on derivatives. It is imposed on any transaction involving a financial institution with its headquarters in the area, or on any transaction on behalf of a client based in the tax area.

It will also apply to transactions based on where the financial product was issued.

The news makes Britain's decision to opt-out from the tax look increasingly questionable. We already have a transaction tax of 0.5 per cent on any trades involving British stock — called stamp duty — which hasn't impacted on Britain becoming a centre of European finance. And the anti-avoidance measures included in the proposed draft will hit a relatively hefty proportion of trades involving the City.

Overall, around €30bn-€35bn is expected to be raised by the FTT, while similar measures implemented in the UK could raise around £8bn for the exchequer, according to the Robin Hood Tax Campaign, who say:

When our European neighbours are making their City firms pay for the damage they've caused it is shocking that our Government is refusing to get our banks to do the same.

With the UK facing welfare cuts and increased austerity, it is incomprehensible that the Chancellor should turn down the opportunity.

While the move looks likely to be effective on a revenue-raising front, it is less so when it comes to altering behaviour — the other key motivation for financial transaction taxes. The EU has less high-frequency trading (HFT) than the US, and the EU-wide FTT doesn't include a measure proposed by the Hollande government in France which would impose a minuscule tax on requests for quotes. That tax was aimed at stopping a type of HFT — quote spamming — which involves very few actual stock purchases; its absence leaves that abuse open.

Similarly, the value of the tax is low enough that it's unlikely that it will promote the "buy and hold" mentality that many were hoping for. Markets will still be volatile, and speculators will still rule. But hopefully the revenue will help.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Donald Trump's healthcare failure could be to his advantage

The appearance of weakness is less electorally damaging than actually removing healthcare from millions of people.

Good morning. Is it all over for Donald Trump? His approval ratings have cratered to below 40%. Now his attempt to dismantle Barack Obama's healthcare reforms have hit serious resistance from within the Republican Party, adding to the failures and retreats of his early days in office.

The problem for the GOP is that their opposition to Obamacare had more to do with the word "Obama" than the word "care". The previous President opted for a right-wing solution to the problem of the uninsured in a doomed attempt to secure bipartisan support for his healthcare reform. The politician with the biggest impact on the structures of the Affordable Care Act is Mitt Romney.

But now that the Republicans control all three branches of government they are left in a situation where they have no alternative to Obamacare that wouldn't either a) shred conservative orthodoxies on healthcare or b) create numerous and angry losers in their constituencies. The difficulties for Trump's proposal is that it does a bit of both.

Now the man who ran on his ability to cut a deal has been forced to make a take it or leave plea to Republicans in the House of Representatives: vote for this plan or say goodbye to any chance of repealing Obamacare.

But that's probably good news for Trump. The appearance of weakness and failure is less electorally damaging than actually succeeding in removing healthcare from millions of people, including people who voted for Trump.

Trump won his first term because his own negatives as a candidate weren't quite enough to drag him down on a night when he underperformed Republican candidates across the country. The historical trends all make it hard for a first-term incumbent to lose. So far, Trump's administration is largely being frustrated by the Republican establishment though he is succeeding in leveraging the Presidency for the benefit of his business empire.

But it may be that in the failure to get anything done he succeeds in once again riding Republican coattails to victory in 2020.

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