Arguing for a financial transaction tax might just be a trump card for Labour, suggests Glyn Ford
When I helped to found the Global Tax, Fiscal Systems and Globalisation Intergroup or, as it was more commonly known, “the Tobin tax group” in the European Parliament after the European elections of 1999 with the French Socialist MEP Harlem Desir, we and those colleagues who joined us were lonely voices in the political wilderness.
The European Commission was against a Tobin tax, as were the overwhelming majority of the European Union’s member states. The then Socialist Group in the European Parliament was riven by division, while the small Trotskyist block helped to vote down a resolution in support of a financial transaction tax.
For few then accepted the argument that the financial markets were out of control, that the speculators had created a casino economy all but completely divorced from the real world. Where new financial instruments were thought up by abstruse mathematicians rather than working economists and where the sheer volume of speculative trading had escalated up to a level where less than 1 per cent of deals were for the purchase of goods, services and raw materials to supply industry and more than 99 per cent were straight gambling. These wagers, driven more by the wider shores of pure mathematics than by the dismal science of economics, used other people’s money for personal enrichment putting at risk in their thoughtless avarice the stability of countries and the survival of communities. Yet barely a dozen years later these direst nightmares look like pleasant daydreams in the wake of a global financial collapse triggered by the toxic combination of ideologically driven political neglect, corporate greed and cowardly regulators. The result in much of Europe and the United States is the impoverishment of a generation and a slashing back of public services to levels that will become little better than those before the post-war settlement of the late 1940s.
All this was the consequence of a failure to protect people in the Thatcherite “no such thing as society” era. Back then, the other face of Nobel Prizewinning economist
James Tobin’s eponymous tax was how it was to be spent. The original vision was simple. Even at tax rates as low as 0.05 per cent – 50 cents for every $1,000 – it would raise up to $200 billion that would have been enough to provide all those living in deep poverty (earning less than $1a day) in the world with basic healthcare, education and housing.
The current crisis has seen a Damascene conversion of politicians, if not bankers. Now the European Commission is in the Tobin church and Commission President José Manuel Barroso is the high priest. In the European Parliament, support has penetrated deep into Christian democracy after sweeping up the remnants of the near and far left. The majority of EU member states have jumped on the bandwagon – the main exception, to no- one’s great surprise, being David Cameron, the bankers’ friend, and the British Government.
Britain’s Tories have long been in thrall to finance capital in the City of London to the long term detriment of Britain’s industrial and service sectors, its uncontrolled growth being more like a cancer in the heart of the economy rather than its motor.
Yet why this extends across politics is unclear. The arguments are three-fold. First the climate is not right to see the imposition of new European taxes with the Eurosceptic tsunami that threatens to sweep England out of the EU. Second, that it is not possible to have such a tax that fails to be all encompassing – imposing its charge not only on Frankfurt and London, but New York and Dubai, Singapore and Tokyo. Third, that the particular proposal is flawed. There seems to be a contradiction between the first two arguments. If we are to get to the latter, there seems no other way but through the EU. Are we really so out of touch with reality that we think anyone in this day and age in the global chancelleries is going to listen to Britain’s lonely pleading? Even so, Algirdas Semeta, the European Commissioner for Taxation and the Customs Union, has made it clear that money raised would stay with member states and so would not be so much a EU tax as a common EU approach to restoring financial stability, leaving member states with no restrictions on how the money raised is spent.
No major financial player can opt out of the EU and even the claim that it would lead to a drift of trading away from Frankfurt and London is not supported by reality. The Bombay Stock Exchange doesn’t face a single financial transaction tax.
Rather, it faces two and that, as its charismatic chairman Subramanian Ramadorai says of Asia’s oldest exchange, has not impeded its success, or its continued growth.
The final argument, that the current proposals are ill-conceived, is easily answered.
If we don’t like what is on offer, then propose an alternative. If we think a stamp duty-type approach is better ¬ with the loopholes solidly filled in – then we should propose that system instead.
The final and most important point is that a financial transaction tax could be a political game-changer for Labour as we approach the next general election. If the Tories stick to their ideological guns and, even as the tax is adopted by the eurozone, resist Britain’s inclusion or, worse, veto the tax for the EU as a whole, then Labour has the opportunity to promise to end either the opt-out or veto if it forms the next government.
True, in consequence, bankers’ votes might be at a premium in 2015, but then others would be tempted to support the promise of an annual cumulative total of public expenditure increases and tax cuts of as much as £17 billion in the United
Kingdom, giving voters both hope and inspiration. That’s an impressive trump card to have.
Glyn Ford is a former Labour MEP and member of Labour Movement for Europe’s national executive. – This article was originally published in Tribune on January 27, 2012.