A Tobin tax has always been a good idea and now its introduction is a real possibility, argues Gary Kent
The longstanding campaign for the Tobin Tax was once compared to the futile search for the Loch Ness Monster. So it is apt that an MP from Scotland, Prime Minister Gordon Brown, has started to scotch the cynics and trumpet the idea of a transaction levy. Britain now joins Germany, France and other countries as keen advocates.
The levy signifies a radical change in political thinking in this country. But life is a great teacher and times have changed. The deeply damaging behaviour of the bankers in the global casino economy sparked a worldwide recession and necessitates both new thinking and new funds. British taxpayers must stump up £1.5 trillion to clear up the mess made by these so-called masters of the universe.
Suddenly, a transaction levy is centre-stage, thanks first to Adair Turner, the chairman of the Financial Services Authority, whose support increased its credibility in the summer.
The Prime Minister broached this taboo in spectacular fashion this autumn. This is particularly striking, given the City’s traditional stranglehold on British Government policy-making.
A fair and popular question is why the many should suffer swingeing spending cuts and/or tax increases to pay for a few bankers’ mistakes – without those bankers changing their tune from the bonus culture to acceptance of transaction levy.
If we really are “all in this together”, as Shadow Chancellor George Osborne claims, why don’t the fat cats cough up their share?
Brown’s surprise support at the recent G20 summit in St Andrews for a global levy and other measures has unleashed a more popular cat among the plump pigeons.
The labour movement should back the PM when he says: “It cannot be acceptable that the benefits of success in this sector are reaped by the few, but the costs of its failure are borne by all of us.”
And Brown is on the money in demanding “a better economic and social contract between financial institutions and the
public based on trust and a just distribution
of risks and rewards”.
The potential benefits of a global tax have evolved over the years. In the early 1970s, the Tobin tax was initially seen as a means of stabilising the then far less volatile markets by “throwing sand into the wheels” of global finance.
As the scope of global currency speculation soared massively, campaigners advocated the benefits of greater stability and focused on the massive revenues that could also be raised.
The Austrian government estimates that a levy on all financial transactions could raise £400 billion. A minute levy on foreign exchange trades would raise less.
Brown suggests that the proceeds of a levy could be devoted to tackling climate change – a canny move in the run-up to the vital Copenhagen summit.
He has gone out on a limb and received some flak, but could yet win the fight if he and others build international alliances and win public support, including backing in parts of the City, as well among financial experts and the trade unions.
Avinash Persaud, chairman of Intelligent Capital and a former banker, argues: “Financial transaction taxes are not only commonplace, but have become easier to enforce. Where there is a will, there is a way.”
And, as Chancellor Alistair Darling has put it: “No one is saying this is easy, but if you don’t look at the possibilities and ask yourself whether or not there could be a fairer way of making sure these big multinationals make a fair contribution, then I think you would be missing something.”
The traditional objection is that it requires an international regime to minimise evasion. But the trillion-dollar-a-day trade is recorded electronically, which makes it easier to track and tax transactions in the same way as tax havens are being tackled.
Supporters of a Tobin-type tax now have a golden opportunity to build the momentum behind this obvious measure of fairness to overcome the deeply damaging power of the banks and brokers.
The Conservatives and some newspapers have accused Brown of chasing headlines and being isolated. However, most people would welcome headlines saying the banks should contribute to their salvation and not just rely on everyone else to pay the costs of their failures.
With a more concerted campaign, it could one day become a decent social democratic source of finance for development and alleviating climate change. The key point is establishing a global tax that would be difficult to reverse.
It’s the right thing to do. According to financial journalist Will Hutton, this is “potentially game-changing”. Let the Tories stick to the bad old days of socially useless banking and global greed while Labour demands a fair deal from finance capital.
Gordon Brown’s suggested sin tax could help to civilise the wilder excesses of global finance, raise billions for good causes and confound the Tories.
See www.stampoutpoverty.org for updates on the Tobin tax campaign
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