As you’ve probably already seen, today saw the launch of a major campaign to introduce a Robin Hood tax on financial transactions by a host of organisations working on issues of global and domestic poverty, international economic reform and social justice. Bill Nighy and Richard Curtis have produced a great little film explaining the tax’s merits and appropriateness and nef is just one of the organisations backing this campaign.
The Robin Hood tax would impose a very small fee for every financial transaction between financial institutions. That means it is not a tax on the financial services you or I would use. It is intended to make those who brought our economy to its knees, massive multi-national financial institutions, pay for the $20,000,000,000,000 (that’s twenty trillion dollars or a third of global GDP) of bailouts, guarantees and quantitative easing they have benefitted from. Here in the UK we’ve spent more than $ 1 trillion (£635 billion) to bail out our banking sector.
Very conservative estimates suggest it could raise £100 billion for domestic and international issues, helping to limit how far we have to cut public services in the UK and ensuring that we meet our commitments to the developing world to alleviate poverty. At a rate of just 0.05% per transaction, and given the huge sums taxpayers have stumped up, it seems a no-brainer in terms of being an appropriate and feasible policy option.
It may seem uncomfortable to line up the usual cast of celebrities and endorsements. It may seem too good to be true. But it actually gets better.
The real value of the Robin Hood tax, more commonly referred to as a Tobin tax after James Tobin, even beyond the vast sums it could raise, is as ‘sand in the wheels’ of the most damaging aspect of our casino financial system – speculation.
By imposing a tax on every transaction equally, such a tax could have a very positively unequal impact by penalising most those who trade most often. If we wish to see pension funds and other investors putting our money to work for the long term, a pre-requisite of a more stable and sustainable financial system, the damaging effects of ‘churn’ and high-frequency trading needs to be addressed.
A Tobin tax, such as in the Robin Hood model, would do precisely that. Rather than complex and unenforceable legislation that tries to define who is a damaging speculator and who is a bona fide investor, this simple tax could overnight re-balance the investment equation in favour of those who buy not because they want to make a fast buck, but because they are investing for the long-term. Our financial system has become woefully disconnected from the real economy. Investors make more money betting on the movement of prices than they do by analysing the profit or losses of the investments they hold. More of the latter would have helped put off the day of reckoning that the Credit Crunch became for our footloose financial captains of industry.
Instead of being unenforceable, a simple tax like this would be very easy to collect but very hard to avoid. How do I know that? Because we already do it, in the case of stamp duty on share trading. It hardly stopped the growth of the City of London, so why would another tiny imposition suddenly impede the genuine job of the financial sector, to determine the long-term value of assets and to re-invest the nation’s savings and pensions to invest in our economy and provide all us with a safe and stable income over our lives.
A Robin Hood tax is well-overdue. Hopefully this campaign will bring us a step closer to seeing it become reality.