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

Photo: Getty
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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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