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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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle