You are currently browsing the tag archive for the ‘robin hood tax’ tag.
nef has long argued that we need systematic reform of our financial system to make it work for people and the planet. So far, the Election Campaign hasn’t touched on banking or finance, which means a crucial debate on the future of our economy is not being had. You can help the cause for financial reform by asking your candidates what their party plans to do to fix the banks.
Lord Turner was at his iconoclastic best last night. In a lecture to the Cass Business School in London, the chairman of the Financial Services Authority once again questioned the value of Britain’s swollen financial sector and called for tougher regulation on City activities.
“We need to challenge radically some of the assumptions of the past 30 years,” he told the audience, “and we need to be willing to consider radical policy responses.” According to Turner, there are a range of ideas that need to be taken out of the “index of forbidden thoughts” and brought into the mainstream.
Among those radical policies was, pleasingly, the idea of a Robin Hood Tax on financial transactions, proposed by nef back in 2001 and now the subject of a major campaign from a coalition of NGOs, faith groups and trade unions.
Lord Turner also reflected on an interview last year in which he branded much of the activity in the financial sector as “socially useless”. “People have asked me whether I regret those comments,” he said, “The answer is no, except in one very small respect, which is that I think it would have been better to use the phrase ‘economically useless’ or ‘of no economic value added’.” This echoes nef‘s recent report A Bit Rich which found that Elite City bankers (earning £1 million-plus bonuses) destroy £7 of value for every £1 they create.
Turner’s comments come less than a week after the publication of new research showing that London has lost its unique position as the highest ranked financial centre in the world: it now shares that status with New York. The banking lobby has tried to argue that the news should make Government cautious about increasing taxes and regulation on the financial sector.
Here at nef, however, we have long argued that finance should be the servant, not the master of the economy. The protracted financialisation of the UK economy has not brought benefits to everyone. Around 3 million people in the UK still lack a basic bank account, and small businesses find it increasingly hard to obtain loans, as banks moved away from local, high street level activities to prioritise speculation and short-term profiteering. The more we can do to reconnect financial services with the real economy – and especially disadvantaged communities – the better. We might also do well to refocus attention on neglected areas of the economy – such as agriculture and manufacturing – in anticipation of the necessary transition to a low carbon food and energy system.
Lord Turner’s comments show that, contrary to what been said by some defeatists in the movement for a just and sustainable economy, there is still plenty of opportunity to introduce new ideas and challenging, radical policy proposals. The door that was flung open by the financial crisis hasn’t closed yet. So let’s delve deep into that index of forbidden thoughts and see what works. If you’re curious, you can start here.
You’d be forgiven for suspecting that the Chairman of the Financial Services Authority, Adair Turner, might be some sort of Climate Camp mole (and you wouldn’t be the first: the Financial Times nicknamed him Swampy last summer).
Look back over Lord Turner’s policy suggestions over the last twelve months and you’ll find that they read like an activist’s wishlist. He began his call to tame global finance by accusing banks of engaging in activity that is “socially useless”, and arguing that many financial institutions had grown “beyond a socially reasonable size”. In the same interview, Lord Turner proposed that banks be subject to a tax on financial transactions, pre-empting the Robin Hood Tax campaign. Speaking to nef policy director Andrew Simms on the BBC’s World Tonight in January, he even suggested that the pursuit of economic growth at all costs might become a “false god“. Not surprisingly, we’re completely in agreement: see our report A Bit Rich on the real social value of elite City banking, our publication on the Robin Hood Tax and our various reports on the limits to growth and GDP: Growth Isn’t Possible, Growth isn’t Working and National Accounts of Well-being.
The reality is, of course, that Lord Turner is a figure at the heart of the establishment, who has reached his conclusions not through ideology, but from a long cool look at things as they stand. Now he is back in the news for his suggestion that government should consider a carbon tax on cheap imports from countries not implementing serious climate measures to help boost British manufacturing and encourage world leaders to tackle climate change. From the Guardian:
Lord Turner, who heads the UK committee on climate change, said the government should “rigorously assess” bringing in levies on cheap imports from countries outside the European Union, which are not subject to carbon-related costs such as the EU emissions trading scheme.
Ministers have in the past resisted calls from European counterparts to introduce such carbon levies, arguing they would be anti-competitive. In future, heavy industry such steel and cement manufacturers in the EU will not have to pay for most of their allowances to emit carbon under the trading scheme, unlike other firms taking part. The idea is to protect EU manufacturers and prevent “carbon leakage” – plants being moved to countries which do not have their own trading schemes.
It has emerged that Indian-owned steelmaker Corus, which is closing its Teesside plant, stands to pocket around £250m by selling unused carbon permits. Unions allege that this is why the company does not want to find a buyer for the plant.
Lord Turner said a change of approach was needed. “Business needs a clear and consistent market-based incentive to move towards a low-carbon economy. We can’t solve the problem by giving out emission allowances for free as the only option for internationally trading manufacturing sectors. Border carbon-price levelling should not be excluded, but rather subject to rigorous assessment alongside other options.”
In 2003, nef published a report called Free-riding on the Climate which proposed that since UN negotiations were not delivering the binding agreement necessary for avoiding dangerous climate change, the UK and the EU should consider using litigation or trade measures to force other industrialised countries to cut emissions. The thinking behind the idea is that if some countries are spending money to cut their emissions in industry and manufacturing, then they will be undercut by cheaper goods from other countries that are still using cheap and dirty energy. A border tax on these imports would try to redress the balance. It’s called a countervailing duty, and is permitted by the World Trade Organisation in certain circumstances. Andrew Strauss, Professor at Widener University School of Law, explains:
The Organisation currently allows states to impose countervailing duties when foreign companies ‘dump’ goods into their markets at less than the market value, and to offset the previously discussed competitive trade advantage that foreign companies gain when they receive subsidies from their governments.
So despite seeming like a radical measure, a carbon tax wouldn’t be without precedent in other areas. In fact, nef‘s report pointed out that there was a scheme introduced in the USA to help clean up domestic toxic sites, which was paid for by taxes levied on the petro-chemical industries: the 1980 US Hazardous Substances Trust Fund, popularly known as Superfund. GATT – the precursor to the WTO – decided that the Superfund wasn’t an unacceptable restraint of trade.
When George W. Bush was resolutely refusing to even acknowledge climate change, Caroline Lucas – on nef‘s behalf – asked Pascal Lamy, then European Commissioner for Trade, whether economic measures against the United States would be permissable under existing agreements. He replied that it was a “thought-provoking contribution”, adding:
“There is a clear case for being aware of any adverse effects on our industry and doing everything in our power to minimise these. In that sense, it is relevant also to keep under review the scope for action under WTO rules to ‘level the playing field’.”
Even with President Bush out of the way, a binding international agreement on climate change still seems impossible to reach. Perhaps it is time to reconsider the possibility of border taxes and sanctions against those countries who are still taking a free ride on the climate.
Financial markets are treacherous. I’m not saying this because I’ve lost a lot of money to them recently- oh wait, we all have! – but because they’re pathologically antisocial yet somehow exotically enticing. They’re the new femmes fatales. No matter how many times we wine and dine them, and how many times we pay for it, they’ll keep us hooked.
The financial markets have been jittery with speculation about Greece defaulting on its debts- unsurprisingly, really, if we consider that Greece has the highest gross government debt as a percentage of GDP in Europe- somewhere around 125%. And, many ask, if Greece does default, what will happen to other countries with high debts, such as Spain and Portugal? Will they survive the same financial attacks – if interest rates rise the deficit effectively increases because of rising interest on the bonds – or will they show more ‘fiscal responsibility’.
Lecturing for Stable Economics
On Monday evening the Nobel-prize winning economist Joseph Stiglitz gave a talk at the London School of Economics in which he noted:
“The irony of this attack should not go unnoticed: the fact that Europe and America were brought into the current mess because of the failures of the financial system. Their deficits grew in the attempt to save the banks and the economy as a result of the financial system failure, and now the financial systems are lecturing the governments about the size of the deficits that their behaviour created…the fact is that the financial markets are again exhibiting the same kind of irrationality and short-sightedness they continually exhibited. What matters is not one side of the balance sheet, it’s both sides. Deficits are a liability, but on the other side are assets: it depends on how you spend the money. And if you spend the money well, on education, on technology and infrastructure, the returns only have to be 5-6% for the long-run national debt actually to be lowered, and the banks should understand this.”
In other words, a ‘credible’ response to tackle the Greek government’s debts does not mean cutting money from health, education, technology and the environment to pay back bond holders – it means instead that lenders understand that investment in these sectors will secure their repayment over the long run. The economic cases for more regulation and a ‘Robin Hood’ tax are also strong. But, I suppose, the markets are worried. And we’re still hooked.
The governments of Europe and America bailed out the financial sector and stimulated the economy. The deficits now need repaying, and it’s becoming clearer who’s going to pick up the tab. Our message to the banks is clear: “don’t worry, we’ll get that”. Because, honestly, we really will get that, and we really, really don’t want you to worry about it.
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. Read the rest of this entry »
Today sees the start of a campaign to introduce a tax on financial transactions in the banking sector that would raise billions to save vital public services, green the economy and tackle poverty.
Called The Robin Hood Tax, the campaign bears the same name as a report nef wrote back in 2001 with our colleagues at War on Want, which outlined why a transaction tax – sometimes called a Tobin Tax – would stabilise volatile markets and raise funds for international development. The Green New Deal Group also recommended a Tobin Tax in their latest report, The Cuts Won’t Work.
Even at a rate as low as 0.05 per cent on each transaction has the possibility to raise hundreds of billions each year. And when the banks have been saved at the taxpayer’s expense, it’s only right that we should see some return from it. And surely even the most self-assured banker – even one played by Bill Nighy – couldn’t be opposed to that.
nef is very proud to be part of the broad coalition of NGOs who are calling for this tax. You can show your support by signing your name on the Robin Hood Tax website.
Large parts of the City have grown too big and need to be cut down to size, if necessary by imposing new taxes, according to the chairman of the Financial Services Authority.
Lord Turner of Ecchinswell, an influential figure in the reform of banking rules in London and beyond, said that the City had grown “beyond a socially reasonable size”, accounting for too much of national output and sucking in too many of Britain’s brightest graduates.
“I think some of it is socially useless activity,” he said, adding that the financial sector had “swollen beyond its socially useful size” and seemed to make excessively large profits.
Lord Turner named fixed-income securities, trading, derivatives and hedging as areas that have grown beyond socially optimal levels, adding that fund management and share trading might also have grown too big.
Lord Turner added that he would favour City-specific taxes if his proposed new rules on capital failed to shrink investment bank balance sheets and curb the more useless or reckless trading. “If increased capital requirements are insufficient, I am happy to consider tax on financial transactions, Tobin taxes,” he told a discussion organised by Prospect magazine.
nef has been long been proposing that regulators curb the power of the financial sector with taxes, and using the revenue generated to finance more socially beneficial schemes. Back in 2001, when the current recession was just a glint in the speculator’s eye, we wrote a report with War on Want in which we proposed a “Robin Hood Tax” or Tobin Tax to divert funds away from the global currency market into funds for peace and international development.
When the report was released, nef Policy Director Andrew Simms argued that a tax of this kind would be “an automatic and politically painless way to help pay for international targets on sustainable development”. Today, when the voting public are still furious about continued bonuses and profiteering in the City, the tax would not only be politically painless, but politically therapeutic. And there are even more uses for the money raised: it could be used to power a Green New Deal, create an adaptation fund for poor countries who are feeling the effects of climate change, kickstart a Post Office Bank which would help small businesses and financially excluded communities… the list could go on.
We’ve also repeatedly said that the banks need cutting down to what Turner calls a “socially reasonable size”. Our post-crunch reports From the Ashes of the Crash and I.O.U.K. both propose de-merging the biggest banks, and separating speculative trading from the retail, high-street banking that all of us rely on.
Such proposals remain radical, but they’re no longer marginal. In an FT column that begins “The Climate Camp has come to Canary Wharf”, Turner is nicknamed “Swampy” for his ideas, but the article concludes that
Lord Turner has a perfect right to start stirring up discussion about how to shrink a wholesale financial sector that has, he says, “swollen beyond its socially useful size”… Let the debate begin.