Europe moves to a financial transactions tax — will we follow?

Eleven countries made the decision to introduce a tax on financial transactions yesterday. Simon Chouffot argues we should take heed.

Just as David Cameron appeared to be grabbing his coat for an EU exit, other European countries took a step towards greater unity with agreement for eleven countries to implement a multi-billion pound tax on the banks.

Not tax rises on low income families, or cuts to public services to balance the books, but a tax on banks. It's not every day you get to write that. The eleven hope that the Financial Transaction Tax of between 0.1-0.01 per cent on stocks, bonds and derivatives could be implemented as early as next year and will raise around £30bn.

The FTT has for years stirred controversy. Banks, following the Mayan's lead, warned that the end of the world was nigh. As campaigners for a Robin Hood Tax we have often been told "you may have a nice video with Bill Nighy in it, but your idea won't wash in the complex world of finance, nor will it cut it at the coalface of Government."

Yet it has – Europe's biggest economies including France, Germany, Italy and Spain are signed up. The group of eleven makes up an impressive 90 percent of Eurozone GDP. Other European nations agreed to let them press ahead. Yet there was one notable abstention, from the UK Government.

Why? It could be argued that a right of centre Government, a powerful financial sector and an economy struggling to return to growth would never add up to much of an appetite to take a chunk out of the banks. Yet all of this applies to Germany, one of the FTT's biggest champions.

The difference is that Germany sees the FTT as a necessary part of the economic equation. It too is implementing tough austerity measures. Germany understands the need to balance and indeed improve the economy by ensuring the financial sector pays its fair share. The richest sector in the world, paying a modest additional tax for causing the largest financial crisis of a generation: quid pro quo.

As Wolfgang Schauble, German finance minister said:

It’s in the interest of the financial sector itself that it should concentrate more on its proper role of financing the real economy and ensuring that capital is allocated in the most intelligent way, instead of banks conducting the bulk of their trading on their own account. That’s in the long-term interest of the financial sector.

Cameron, conversely, opted to call the Financial Transaction Tax "madness", fighting hammer and tong to protect the hallowed elite in the City, whilst cutting benefits and services for the poorest. The Government's much touted bank levy, will raise a just £2.5bn a year and be offset by a lowering of Corporation Tax that Osborne has boasted will be the lowest of any major western economy.

Mervyn King, Governor of the Bank of England pointed out the irony that "the price of the financial crisis is being borne by people who did absolutely nothing to cause it", adding that he was "surprised that the degree of public anger has not been greater than it has".

But if the moral argument doesn't sway you, then the fiscal case should. Leading City figure Avinash Persaud has calculated that if the UK were to join in with the European Financial Transaction Tax it would raise the Exchequer at least £8bn a year. This could lift over three million people struggling on minimum pay above the living wage threshold.

Ten thousand teachers lost their jobs in 2010/2011 and there are 5,780 fewer nurses than at the time of the last general election – in eleven days an FTT could raise enough revenue to re-employ every one. In just a single day the tax could raise enough money to reinstate Sure Start centres for 25,000 children.

EU tax chief Algirdas Semeta described the FTT agreement as a “major milestone” that can “pave the way for others to do the same." The door has been left open and we should continue to press the UK Government to walk through it. The Labour Party wanted cover to fully back this tax – they now have it.

But this doesn’t have to be another case of Britain versus Europe. The UK has already got an FTT on share transactions – stamp duty – that raises some £3bn a year for the Exchequer without driving business away. Extending this to bonds and derivatives is not a dramatic leap and surely one that makes moral and financial sense.

As Cameron distances himself from Europe this is one item we should be reminding him is still on the agenda.

Demonstrators dressed as Robin Hood make their way down the Chicago River. Photograph: Getty Images

Simon Chouffot is a spokesperson for the Robin Hood Tax campaign and writes on the role of the financial sector in our society.

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How tribunal fees silenced low-paid workers: “it was more than I earned in a month”

The government was forced to scrap them after losing a Supreme Court case.

How much of a barrier were employment tribunal fees to low-paid workers? Ask Elaine Janes. “Bringing up six children, I didn’t have £20 spare. Every penny was spent on my children – £250 to me would have been a lot of money. My priorities would have been keeping a roof over my head.”

That fee – £250 – is what the government has been charging a woman who wants to challenge their employer, as Janes did, to pay them the same as men of a similar skills category. As for the £950 to pay for the actual hearing? “That’s probably more than I earned a month.”

Janes did go to a tribunal, but only because she was supported by Unison, her trade union. She has won her claim, although the final compensation is still being worked out. But it’s not just about the money. “It’s about justice, really,” she says. “I think everybody should be paid equally. I don’t see why a man who is doing the equivalent job to what I was doing should earn two to three times more than I was.” She believes that by setting a fee of £950, the government “wouldn’t have even begun to understand” how much it disempowered low-paid workers.

She has a point. The Taylor Review on working practices noted the sharp decline in tribunal cases after fees were introduced in 2013, and that the claimant could pay £1,200 upfront in fees, only to have their case dismissed on a technical point of their employment status. “We believe that this is unfair,” the report said. It added: "There can be no doubt that the introduction of fees has resulted in a significant reduction in the number of cases brought."

Now, the government has been forced to concede. On Wednesday, the Supreme Court ruled in favour of Unison’s argument that the government acted unlawfully in introducing the fees. The judges said fees were set so high, they had “a deterrent effect upon discrimination claims” and put off more genuine cases than the flimsy claims the government was trying to deter.

Shortly after the judgement, the Ministry of Justice said it would stop charging employment tribunal fees immediately and refund those who had paid. This bill could amount to £27m, according to Unison estimates. 

As for Janes, she hopes low-paid workers will feel more confident to challenge unfair work practices. “For people in the future it is good news,” she says. “It gives everybody the chance to make that claim.” 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.