A financial transactions tax just makes good business sense for Britain

Rather than refusing it to rebuild our casino banks, we should create something new and better.

According to Albert Einstein the definition of insanity is “doing the same thing over and over again and expecting different results”. Yet bolstered by today’s improving GDP figures, David Cameron’s government appears set on rebuilding the UK economy around the casino capitalists of the City of London. The financial crisis may have derailed the economy to the extent that as a country we’re still poorer than we were six years ago but let’s just put the old show back on the road again.

This attitude was exemplified by Boris Johnson’s speech to the British Bankers’ Association this week when he invited European banks to come to the UK to avoid the proposed European financial transactions tax (FTT, also knows as a Robin Hood Tax). Nevermind the fact that moving to London would not actually help them evade the tax, the message was clear: the UK wants the same as the financial sector, a return to business (and bonuses) as usual.

Thankfully, MPs on the Business, Innovations and Skills Committee today intruded into the debate calling into question the Government’s position. In their response to the Kay review of UK equity markets and long-term decision making, MPs not only called for the Government to get on with implementing the professor’s recommendations – including a review of merger and acquisition activity – but also called on Cameron and Osborne to think again about their opposition to the FTT.

Their argument does not rest on the moral imperative that the financial sector should repay the damage it has done – something even the Prime Minister and Chancellor are wary of disputing. Instead the Committee makes hard-headed economic arguments for an FTT - that it would curb damaging high frequency trading, the computer-driven casino capitalism that causes flash crashes. It is an argument I have made here previously.

The business case for an FTT is so strong that Vince Cable told MPs that “I am, in some ways, quite disposed to it”. But given the political capital George Osborne and David Cameron have invested in opposing the plans of 11 European countries to press ahead with an FTT, it is difficult to see this Government changing course.

That provides a real opportunity for Labour. Ed Miliband’s themes of "responsible capitalism" and "one nation" could have been adopted with the Robin Hood Tax in mind. What better way of cracking down on the "wild-west" excesses of the market that he condemned in his conference speech two years ago than by levying a tiny tax that will have negligible impact on long-term investment but make financial gambling via high-frequency trading unprofitable?

And what better way of showing that Labour is truly a "one nation party" than by making the Square Mile pay for the damage it has done to the whole of the British economy and at the same time make it less likely that it will be able to wreak such damage in future?

It is hard-headed economic arguments like these which have led the German finance ministry to champion the tax within Europe. And with 11 European countries – including the major economies of France, Germany, Italy and Spain – set to introduce a wide ranging FTT on shares, bonds and derivatives early in 2014, a future Labour government would hardly be leaping into the dark if they followed suit.

Miliband and his Shadow Chancellor Ed Balls have spoken warmly about the Robin Hood Tax and its potential to raise billions to tackle poverty at home and abroad. But like the Government, they have pretended that such a tax must be global (or at least have the support of the US) to work. Given the UK’s own FTT – the 0.5 per cent stamp duty on shares – raises about £3bn annually this is palpable nonsense. It is to be hoped that today’s dose of economic good sense from MPs will encourage them to be a bit bolder.

Not quite a casino bank… Photograph: Getty Images

Jon Slater is a Senior Press Officer for Oxfam and a spokesperson for the Robin Hood Campaign

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

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Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.