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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Jeremy Corbyn will stay on the Labour leadership ballot paper, judge rules

Labour donor Michael Foster had challenged the decision at the High Court.

The High Court has ruled that Jeremy Corbyn should be allowed to automatically run again for Labour leader after the decision of the party's National Executive Committee was challenged. 

Corbyn declared it a "waste of time" and an attempt to overturn the right of Labour members to choose their leader.

The decision ends the hope of some anti-Corbyn Labour members that he could be excluded from the contest altogether.

The legal challenge had been brought by Michael Foster, a Labour donor and former parliamentary candidate, who maintained he was simply seeking the views of experts.

But when the experts spoke, it was in Corbyn's favour. 

The ruling said: "Accordingly, the Judge accepted that the decision of the NEC was correct and that Mr Corbyn was entitled to be a candidate in the forthcoming election without the need for nominations."

This judgement was "wholly unaffected by political considerations", it added. 

Corbyn said: "I welcome the decision by the High Court to respect the democracy of the Labour Party.

"This has been a waste of time and resources when our party should be focused on holding the government to account.

"There should have been no question of the right of half a million Labour party members to choose their own leader being overturned. If anything, the aim should be to expand the number of voters in this election. I hope all candidates and supporters will reject any attempt to prolong this process, and that we can now proceed with the election in a comradely and respectful manner."

Iain McNicol, general secretary of the Labour Party, said: “We are delighted that the Court has upheld the authority and decision of the National Executive Committee of the Labour Party. 

“We will continue with the leadership election as agreed by the NEC."

If Corbyn had been excluded, he would have had to seek the nomination of 51 MPs, which would have been difficult since just 40 voted against the no confidence motion in him. He would therefore have been effectively excluded from running. 

Owen Smith, the candidate backed by rebel MPs, told the BBC earlier he believed Corbyn should stay on the ballot paper. 

He said after the judgement: “I’m pleased the court has done the right thing and ruled that Jeremy should be on the ballot. This now puts to bed any questions about the process, so we can get on with discussing the issues that really matter."

The news was greeted with celebration by Corbyn supporters.