11 EU countries are about to implement an FTT: the UK should make it 12

The Overton window is shifting, and now might be the time for an FTT.

In UK political circles, little serious consideration was given to the idea of a general financial transaction tax (FTT) before the financial crisis and recession. The City’s view that it would damage the UK’s successful financial industry held sway. But in the last few years, politicians have become more sceptical about what the City tells them and have expressed varying degrees of support for the principle of an FTT. The stumbling block, though, remains the possibility that an FTT introduced unilaterally in the UK would see the City lose business to other financial centres, in particular to New York.

Like the perennial threat that bankers are on the brink of leaving London for other shores as a result of the bankers bonus tax, or the bank levy, or the 50p tax rate, this claim is exaggerated. A badly designed FTT might result in business leaving these shores; a well-designed one could minimise that risk.

And the UK already has a well-designed FTT to act as a model: stamp duty on share purchases. This is very hard to avoid because the tax is paid when the change of legal ownership of shares is registered. If the tax is not paid, the purchaser does not legally acquire the shares. At least 30 other countries also have effective FTTs, and they are applied in 13 of the world’s top 15 financial centres.

Now 11 EU countries, including Germany, France and Italy, intend to introduce a financial transaction tax of 0.1 per cent on trades in shares and bonds and 0.01 per cent on trades in derivatives. We have argued in a recent paper that the UK should join with these countries broaden its FTT to trades in bonds and derivatives. If it is worried about losing business to New York, it should actively lobby US policy makers to introduce an FTT of their own, rather than waiting passively for them to act.

It has been estimated that joining the other 11 EU countries could raise up to £20bn a year in additional tax revenues. These could be used to ease the pressure for cuts in departmental spending and welfare payments. Better still, some of these revenues could be diverted to capitalise a British Investment Bank that would invest in infrastructure projects and lend to small and medium-sized business.

In a recent speech, Ed Miliband backed the idea British Investment Bank, together with a network of regional banks to help revitalise the economy. But he has not identified where the money to set up these banks and enable them to start lending would come from. Given the UK’s still large public sector borrowing requirement, this is a serious omission. An FTT could be the answer.

Of course, setting up these banks will take some time. In the interim, revenues from an FTT could be used directly to increase public spending on infrastructure. This would reconcile theviews of the Business Secretary, Vince Cable, who made the case for kick starting economic growth by investing in infrastructure projects and the Prime Minister, who has argued against unfunded tax cuts and borrowing for spending.

Extra infrastructure spending, a new bank – or set of regional banks – and a tax on financial transactions will not, on their own solve the UK’s economic problems. But they would be a step in the right direction. 11 EU countries are about to implement an FTT; the UK should make it 12.

Photograph: Getty Images

Tony Dolphin is chief economist at IPPR

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.