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.

Getty
Show Hide image

Miners against coal: the pit where former Welsh miners are protesting alongside climate change activists

The Merthyr Tydfil miners’ long history of struggle is spurring them on to a whole new form of action.

The retired miners and factory workers at the working men's club in the Welsh town of Merthyr Tydfil are no strangers to hard times. Our second son was born during the 1984 strike and we had nothing for 12 months, one member tells me. The town continues to struggle with unemployment – last year the rate for men was nearly double that of the UK as a whole – over three decades on from the miners’ strike. But these days the atmosphere at the club is more resigned than radical. A singer croons his way through “Only the Lonely”, while talk at the bar is of better times: days when work was plentiful, days when, “you went down the mine a boy and came up a man”.

When the deep pits closed in the 1980s, Merthyr became a dumping ground – quite literally. Not only is the nearby landfill one of Europe's biggest, the valley is now home to the largest opencast (open-pit) mining operation in the UK. Its towering spoil tips throw a Mordor-esque shadow over the community below, coating homes and lungs alike in dust. 

Even former miners lament the small number of poorly-regulated jobs the Ffos-Y-Fran pit currently provides. Opencast is lorry driving, not mining, is a sentiment I hear repeated across the town, from the club bar to chip shops to the office of the miners’ union itself.

Just as the town's fortunes rose with coal, so they have plummeted as the industry has declined. While the fuel still accounts for around 10 per cent of UK electricity generation on any given day, last year generation fell to its lowest level since the 1950s. The need to decarbonise also looks set to reduce demand further. The effects of last December's Paris climate agreement – and its aim to limit warming below 2C  are already being felt in Wales: the Aberthaw power station is a key destination for Welsh coal, but recently announced plans to reduce its output.

The club's secretary can only think of one member who still works in the mine. Others I encounter chase shifts at the local meat-packing factory, or have to travel for over an hour outside the town. Support for jobs unsurprisingly usually trumps support for climate change deals: “If it brings in work, we don’t have a problem with it,” is the general consensus inside the club. If someone tells you they're against the mine, they're probably from England, not Wales, says a resident of the nearby village of Fochriw. 

The people of Merthyr, however, are also no strangers to fighting perceived injustice. In the early nineteenth century, Merthyr's thriving ironworks made it the largest town in Wales. But when depression hit in 1831, low wages and sudden dismissals drove many to despair. By the start of June that year, thousands gathered to march against the iron masters and coal barons. And for the very first time, the red flag of revolution was raised on British soil.

185 years later, while club members sipped their drinks, others are writing Merthyr's history afresh. Up on the hills above the town  beyond the litter-strewn fields and the “Danger: No trespass” signs  around 300 campaigners from across the UK gathered to call for an end to coal.

Led by the climate activist group Reclaim the Power, many of the camp’s young attendees work for Westminster MPs and NGOs. A litter-pick was followed by the rapid erection of communal kitchens and sustainable loos. There were safe spaces, legal training, and warnings not to disturb the nearby nesting birds.

On Tuesday morning, the activists occupied and (temporarily) shut down operations at the mine – tying themselves to machinery and lying across access roads in an attempt to symbolise the red line that carbon emissions must not cross. Their action is the first in a fortnight of global anti-fossil fuel protests  from plans for train heists in Albany, to protesting in kayaks in Vancouver. And while global reach counts for little without local support, the climate campaigners at Ffos-Y-Fran are not alone.

Since 2007, members of the United Valleys Action Group (UVAG), a group of local residents and ex-miners, have also fought the mine's planned expansion into the nextdoor valley. On Tuesday, many joined with the activists to blockade the entrance to the mine's headquarters. One member, 56-year-old Phil Duggan, has worked in the pits from the age of 16. And while he is “no tree-hugger”, he is tired of accepting jobs at any cost.

I don't want my children to suffer the ill health I have,” he says. “To some extent we [ex-miners] have been able to claim compensation. But the way things are going now you're not going to be able to claim anything. The deregulation of employment is making people desperate  we're going back to an era that our fore-fathers unionised to put right.”

In a strange twist of fate, it’s these Merthyr miners history of struggle – their long fight to protect their livelihoods and communities  which now spurs them to action against new mines.


Phil Duggan entered the pits aged 16. Photos: India Bourke

Wayne Thomas at the National Union of Mineworkers says he recognises that, unless carbon capture technology can develop apace, the Paris agreement looks set to speed up  coal's decline. But he also believes that British coal has its place in responsibly managing the transition to renewables – a place that includes reducing foreign imports, cleaning up the dirty acts of private mining companies, and putting control back in the hands of local communities. If you're going to phase out an industry, you've got to put something in place to limit the damage.

For evidence, he need point no further than the co-operatively run mine at Tower colliery, where an independently-managed fund ensures that, when the time comes, the opencast site will be carefully regenerated. Sadly, the same cannot be said of the privately-owned operation at Ffos-Y-Fran for certain.

Last year, the Welsh Assembly voted in favour of a moratorium on opencast mining. The government has yet to act, but this may change depending on how the balance of power falls after Thursday's elections. Assembly candidates from both the Green party and Liberal Democrats voiced their support for the UVAG campaigners at a meeting in one of the villages effected by the new pit proposals.

Utlimately, the decline of some of Welsh coal's main customers  the steel works at Port Talbot and the power station at Aberthaw  is likely do more to undermine UK coal than the red lines campaigners draw. But, along the way, new alliances between climate idealists and unions could breathe new life into both movements. In the words of Merthyr Tydfil’s ancient motto: “Nid cadarn ond brodyrdde”  Only brotherhood is strong.


Chris and Alyson, founders of United Valleys Action Group.

India Bourke is the New Statesman's editorial assistant.