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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What will Labour's new awkward squad do next?

What does the future hold for the party's once-rising-stars?

For years, Jeremy Corbyn was John McDonnell’s only friend in Parliament. Now, Corbyn is the twice-elected Labour leader, and McDonnell his shadow chancellor. The crushing leadership election victory has confirmed Corbyn-supporting MPs as the new Labour elite. It has also created a new awkward squad.   

Some MPs – including some vocal critics of Corbyn – are queuing up to get back in the shadow cabinet (one, Sarah Champion, returned during the leadership contest). Chi Onwurah, who spoke out on Corbyn’s management style, never left. But others, most notably the challenger Owen Smith, are resigning themselves to life on the back benches. 

So what is a once-rising-star MP to do? The most obvious choice is to throw yourself into the issue the Corbyn leadership doesn’t want to talk about – Brexit. The most obvious platform to do so on is a select committee. Chuka Umunna has founded Vote Leave Watch, a campaign group, and is running to replace Keith Vaz on the Home Affairs elect committee. Emma Reynolds, a former shadow Europe minister, is running alongside Hilary Benn to sit on the newly-created Brexit committee. 

Then there is the written word - so long as what you write is controversial enough. Rachel Reeves caused a stir when she described control on freedom of movement as “a red line” in Brexit negotiations. Keir Starmer is still planning to publish his long-scheduled immigration report. Alison McGovern embarked on a similar tour of the country

Other MPs have thrown themselves into campaigns, most notably refugee rights. Stella Creasy is working with Alf Dubs on his amendment to protect child refugees. Yvette Cooper chairs Labour's refugee taskforce.

The debate about whether Labour MPs should split altogether is ongoing, but the warnings of history aside, some Corbyn critics believe this is exactly what the leadership would like them to do. Richard Angell, deputy director of Progress, a centrist group, said: “Parts of the Labour project get very frustrated that good people Labour activists are staying in the party.”

One reason to stay in Labour is the promise of a return of shadow cabinet elections, a decision currently languishing with the National Executive Committee. 

But anti-Corbyn MPs may still yet find their ability to influence policies blocked. Even if the decision goes ahead, the Corbyn leadership is understood to be planning a root and branch reform of party institutions, to be announced in the late autumn. If it is consistent with his previous rhetoric, it will hand more power to the pro-Corbyn grassroots members. The members of Labour's new awkward squad have seized on elections as a way to legitimise their voices. But with Corbyn in charge, they might get more democracy than they bargained for.