Osborne will score a financial own-goal tomorrow

The Chancellor, in turning down the chance to implement a Financial Transactions Tax, will cost the UK dearly.

A fiscal measure that could raise £8bn, boost GDP by 0.25 per cent, provide vital funds for job-creation, infrastructure projects and poverty reduction, calm excessive speculation and reduce the regularity of financial crashes would seem like a no-brainer for a Chancellor. Struggling to reduce the deficit and bring public finances under control, George Osborne is set to score an own goal by refusing to sign up for the Financial Transaction Tax (FTT) which is rapidly becoming a reality in Europe.

Twelve European countries, including the big economies of Germany, France, Italy and Spain, have agreed to a small transaction tax of 0.1 per cent on equities and bonds and 0.01 per cent on derivatives. The initiative, which could generate €37bn per year, is expected to be given the green light by the European Parliament on 12 December.

The UK government’s reasons for rejecting the FTT are flawed on many counts. The Chancellor stubbornly clings to the argument that the FTT must be global to work. This ignores the fact that over 40 countries including some of the world’s leading financial centres and dynamic economies, have successfully implemented FTTs.

Hong Kong raises £1.7bn a year through taxes on derivative transactions while South Korea raises £3.8bn. Even Switzerland and the US have their own taxes on transactions which do not seem to have harmed their reputations as financial centres. Indeed, the UK’s very own stamp duty of 0.5 per cent on share transactions currently raises about £3bn a year for the Treasury; much of this tax (around 40 percent) is paid by people, including non-British, based abroad, who trade in UK shares.

Another myth often touted is that ordinary people and pensioners will end up paying the price. But the rate for the FTT is set so low precisely to avoid hitting longer term investments such as people’s pensions. On the contrary, a paper published this week shows that the FTT is an opportunity to help safeguard pensioners’ investments through reducing short-term speculative activity and encouraging pension funds to return to their traditional, less risky role as buy-and-hold investors - exactly the sort of cautious, long-term funds which experienced the most growth over the rocky 2008-2010 period.

Sparked by recent low interest rates, the increased turnover of assets amongst pension funds contributes to management costs of between two and 20 per cent. It is these high fees - reaped by intermediaries such as advisers, managers and brokers - that are having a major impact on pensioners’ returns.

The tax will also help improve market stability by reducing high-frequency trading including computer-driven trading in which shares are bought and sold hundreds of times a second. Virtually unheard of seven years ago, high frequency trading now accounts for up to 77 percent of all trading in UK equities.

Dictated by computers, too fast for humans to monitor, high frequency trading can create sudden crashes and wild fluctuations in stock prices that bear no relation to market fundamentals and serve little economic purpose. Applying a tiny tax every time a stock is traded will dramatically reduce the incentive to use computers at lightening speeds as the tax outweighs the wafer-thin profits. This will improve financial stability and help reduce the likelihood of future crises, which can lead to a higher level of GDP in the future.

If a levy of 0.1 per cent also makes other elements of City trading unprofitable, you have got to ask how valuable was that activity in the first place?

By triggering a shift away from short-term trading in favour of long-term holding the FTT will thus help reduce misalignments in markets and their subsequent abrupt adjustments or crashes, decreasing the likelihood of future crises. Indeed, countries with FTTs were amongst those least affected by the 2008 crash.

At a time when the UK government continues to struggle with the impact of a crisis that will according to the Bank of England, ultimately cost the UK at least £1.8trn and as much as £7.4trn in lost GDP, it seems reasonable to expect the financial sector, largely responsible for creating the crisis, not just to contribute to repair the damage but also to adopt measures to help reduce the likelihood of future crises.

To us and 50 other financiers who wrote to David Cameron and other European leaders in support of the tax, it is clear the FTT would help rein in markets, help kick-start national economies and provide money to help the world’s poorest countries. The FTT will shortly be a reality in Europe’s biggest economies. The UK cannot afford to ignore it.

Campaigners for a FTT protest in Westminster. Photograph: Getty Images

Jack Gray is currently an Adjunct Professor at the Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology Sydney and an adviser to pension funds in Australia and overseas.

Professor Stephany Griffith-Jones is Financial Markets Director at the Initiative for Policy Dialogue, Columbia University.

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Harriet Harman warns that the Brexit debate has been dominated by men

The former deputy leader hit out at the marginalisation of women's voices in the EU referendum campaign.

The EU referendum campaign has been dominated by men, Labour’s former deputy leader Harriet Harman warns today. The veteran MP, who was acting Labour leader between May and September last year, said that the absence of female voices in the debate has meant that arguments about the ramifications of Brexit for British women have not been heard.

Harman has written to Sharon White, the Chief of Executive of Ofcom, expressing her “serious concern that the referendum campaign has to date been dominated by men.” She says: “Half the population of this country are women and our membership of the EU is important to women’s lives. Yet men are – as usual – pushing women out.”

Research by Labour has revealed that since the start of this year, just 10 women politicians have appeared on the BBC’s Today programme to discuss the referendum, compared to 48 men. On BBC Breakfast over the same time period, there have been 12 male politicians interviewed on the subject compared to only 2 women. On ITV’s Good Morning Britain, 18 men and 6 women have talked about the referendum.

In her letter, Harman says that the dearth of women “fails to reflect the breadth of voices involved with the campaign and as a consequence, a narrow range [of] issues ends up being discussed, leaving many women feeling shut out of the national debate.”

Harman calls on Ofcom “to do what it can amongst broadcasters to help ensure women are properly represented on broadcast media and that serious issues affecting female voters are given adequate media coverage.” 

She says: "women are being excluded and the debate narrowed.  The broadcasters have to keep a balance between those who want remain and those who want to leave. They should have a balance between men and women." 

A report published by Loughborough University yesterday found that women have been “significantly marginalised” in reporting of the referendum, with just 16 per cent of TV appearances on the subject being by women. Additionally, none of the ten individuals who have received the most press coverage on the topic is a woman.

Harman's intervention comes amidst increasing concerns that many if not all of the new “metro mayors” elected from next year will be men. Despite Greater Manchester having an equal number of male and female Labour MPs, the current candidates for the Labour nomination for the new Manchester mayoralty are all men. Luciana Berger, the Shadow Minister for mental health, is reportedly considering running to be Labour’s candidate for mayor of the Liverpool city region, but will face strong competition from incumbent mayor Joe Anderson and fellow MP Steve Rotheram.

Last week, Harriet Harman tweeted her hope that some of the new mayors would be women.  

Henry Zeffman writes about politics and is the winner of the Anthony Howard Award 2015.