by René Lavanchy
The TUC proposed a package of tax-raising measures that they say could raise up to £110 billion a year this week, as Gordon Brown committed the Government to cutting the budget deficit in half by 2014 in the Queen’s Speech.
Chancellor Alistair Darling is expected to outline how he plans to reduce the deficit – which the Treasury forecasts will hit a record £175 billion this year – in his pre-Budget report on 9 December. He is expected to outline spending cuts across most government departments.
But speaking at the TUC’s “Beyond Crisis” economic conference this week, general secretary Brendan Barber called for an internationally recognised “Tobin tax” on financial transactions and a cap on tax relief for people earning over £100,000. TUC figures suggest these two moves alone could wipe out most of the deficit.
The United States and other countries have indicated they would block a tax on transactions of the kind supported by Mr Brown, Mr Darling and City minister Lord Turner.
But Mr Barber proposed a domestic alternative that he said could raise 30 per cent as much money. He said: “A 0.05 per cent tax on UK financial trades alone could raise as much as £100 billion a year – and would act as a brake on excessive risk taking and speculative transfers of funds.
“And even if international agreement proved impossible, the TUC believes a transaction tax could be implemented domestically. For example a 0.05 per cent tax on instant sterling transfers between UK financial institutions could net £30 billion a year. The logic is clear for all to see.”
The TUC is also calling for curbs on income tax relief to raise £10 billion. Research published this week says that, despite a top income tax rate of 40 per cent, people earning between £100,000 and £150,000 a year enjoy an effective rate of 27 per cent due to allowances.
Mr Barber also attacked the Government’s decision in the Queen’s Speech this week to introduce a Fiscal Responsibility Bill to reduce the deficit as “poor economics”, saying the economy needed to start growing first.
