Two years on from the supposed “end” of the financial crisis, the economic outlook continues to worsen for the vast majority of ordinary people. Unemployment, particularly among young people, has reached record highs following government austerity programmes, while inflation continues to rocket. At the European level, the eurozone itself is in crisis and is being propped up by further taxpayer-funded bailouts.
Many people find it scarcely believable that the banks have paid no price for their mistakes. Corporate lobbyists – enjoying privileged access to government, as recent scandals reveal – have gutted any attempts at policy reform, while the bankers have returned to paying themselves multi-million pound bonuses. Or, as a placard at the Occupy Wall Street protests put it: “Socialism for the banks, capitalism for the rest of us”.
In this situation, it is difficult to envisage long-term solutions to the failures of the financial system. Certainly, politicians seem to have no answers other than returning to business as usual by bailing out banks. And it is all too tempting to believe that there is little that the 99 per cent of people who are not super-rich beneficiaries of the current system can do about it.
So it is even more remarkable that a fairly radical proposal for a European financial transaction tax (FTT) has got as far as it has. The European Commission, hardly a hotbed of progressivism, has been cajoled into putting forward a proposal for an FTT: a tiny tax of fractions of 1 per cent, levied by governments on all kinds of financial transactions including “over the counter” ones – in other words, outside official regulated markets. It is aimed at financial institutions, reining in millions of wild bets they place every day and raising some money for governments at the same time.
How did such an idea get past the self-styled “masters of the universe”? It hasn’t been easy. War on Want launched the first British campaign for a Tobin tax in 1998, following the Asian currency crisis.
Despite the huge destruction caused by currency speculators then, it has taken 13 years for the idea to become a mainstream one in Europe. Placing any kind of restrictions on the finance sector has been resisted by consecutive governments since Margaret Thatcher’s reign.
Since the story that government overspending led us into crisis has been widely accepted, the argument for austerity cuts has also generally been swallowed. On the other hand, new ways to raise taxes in order to tackle the deficit – especially ones that don’t directly hit the electorate – have suddenly come back into fashion and created space for a new push for an FTT.
We now have a chance to realise an idea that was first mooted in the 1970s. Despite its attractions in putting a brake on the high-frequency market trading that exacerbated the financial crisis, it is inevitably domestic political considerations that have given us the breakthrough. Both French and German leaders, eyeing upcoming elections and struggling under reduced tax receipts, have taken the initiative to push for an FTT at the European level. Previously they all agreed that it would only be possible if agreed globally – a virtual impossibility. The British Government, still in the pocket of the City of London, maintains this fiction, fighting fiercely against the Robin Hood tax campaign for an FTT in this country.
However, we shouldn’t discount the very effective work of European FTT campaigners who succeeded in getting a hostile European Parliament committee to vote for the tax by mobilising voters across Europe to write to their MEPs. This clear signal from the Parliament obliged the European Commission at least to put the proposal forward.
But it can’t override the European Council, which is composed of member state ministers. Continued pressure from below, from ordinary people, is essential if we are to see this through to the end.
We do have an opportunity for reform as the FTT drags through the European legislative process. We also have an opportunity in the shape of the G20 meeting in Nice. Nominally, this has had a global FTT on its agenda since promising action in 2008. Yet its only action so far has been to repeat the mistakes of the 1980s, punishing Greece and Ireland as odious-debt-ridden African countries were punished, and setting them back decades.
That’s where we come to the bigger issue of tax justice in general. Attempting to persuade institutions such as the G20 or International Monetary Fund of the error of their ways can only ever go so far. Likewise, tempting though it is to make banks pay for their greed through an FTT, we risk repeating the mistake of the Gordon Brown era: skimming tax off the top to pay for welfare measures while leaving the foundations of a rotten system intact.
Rather, we need a fundamental retooling of our tax system. Measures such as closing down British tax havens would be a good start. Many suggestions for the necessary changes at national, European, global and industry level can be found in War on Want and PCS’
joint report on tax havens (available on our website:http://www.waronwant.
org/campaigns).
More widely, we need to move away from seeing tax as an unfair burden, to be avoided where possible, to seeing it as an essential tool for redistributing wealth and paying for essential services, along with holding governments to account for actually doing this.
Tax justice has been identified as key to solving the economic crisis by groups as diverse as the Occupy London movement and the International Trade Union Confederation – and with good reason.
On the way to a new financial system, tax justice is where we can begin to reverse 30 years of wealth grabbing by the 1 per cent and return democratic power over our economies to the 99 per cent.
