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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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.