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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“Trembling, shaking / Oh, my heart is aching”: the EU out campaign song will give you chills

But not in a good way.

You know the story. Some old guys with vague dreams of empire want Britain to leave the European Union. They’ve been kicking up such a big fuss over the past few years that the government is letting the public decide.

And what is it that sways a largely politically indifferent electorate? Strikes hope in their hearts for a mildly less bureaucratic yet dangerously human rights-free future? An anthem, of course!

Originally by Carly You’re so Vain Simon, this is the song the Leave.EU campaign (Nigel Farage’s chosen group) has chosen. It is performed by the singer Antonia Suñer, for whom freedom from the technofederalists couldn’t come any suñer.

Here are the lyrics, of which your mole has done a close reading. But essentially it’s just nature imagery with fascist undertones and some heartburn.

"Let the river run

"Let all the dreamers

"Wake the nation.

"Come, the new Jerusalem."

Don’t use a river metaphor in anything political, unless you actively want to evoke Enoch Powell. Also, Jerusalem? That’s a bit... strong, isn’t it? Heavy connotations of being a little bit too Englandy.

"Silver cities rise,

"The morning lights,

"The streets that meet them,

"And sirens call them on

"With a song."

Sirens and streets. Doesn’t sound like a wholly un-authoritarian view of the UK’s EU-free future to me.

"It’s asking for the taking,

"Trembling, shaking,

"Oh, my heart is aching."

A reference to the elderly nature of many of the UK’s eurosceptics, perhaps?

"We’re coming to the edge,

"Running on the water,

"Coming through the fog,

"Your sons and daughters."

I feel like this is something to do with the hosepipe ban.

"We the great and small,

"Stand on a star,

"And blaze a trail of desire,

"Through the dark’ning dawn."

Everyone will have to speak this kind of English in the new Jerusalem, m'lady, oft with shorten’d words which will leave you feeling cringéd.

"It’s asking for the taking.

"Come run with me now,

"The sky is the colour of blue,

"You’ve never even seen,

"In the eyes of your lover."

I think this means: no one has ever loved anyone with the same colour eyes as the EU flag.

I'm a mole, innit.