THE FINANCIAL TRANSACTION TAX TIMES EDITION Friday 8th May 2015
Business lauds Labour’s new economy
Bankers to set up ‘Occupy’ protest camp
Business leaders and entrepreneurs welcome pledge to use part of the proceeds from a Robin Hood Tax to help small businesses, Page 2.
Bankers claim the new Robin Hood Tax breaks the agreement whereby the public foot the bill whenever bankers make mistakes, Page 3.
Labour Landslide Bob Diamond to release charity single in support of Robin Hood Tax Election Victory on Robin Hood Tax Ticket 8 May 2015
• Pledge to make financial sector work for Britain wins votes • Robin Hood Tax will help reverse five years of austerity • Miliband’s speech ushers in new era for ‘Rebuilding Britain’
Labour last night won a landslide general election victory, beating both the Conservatives and Liberal Democrats to deliver a majority in Parliament. Voters turned out in record numbers, energised by Labour’s election pledge to implement a Robin Hood Tax that would help reverse five years of austerity and make the financial sector work for, and not against, the interests of Britain. Miliband’s acceptance speech ushered in a new era for ‘Rebuilding Britain’. The Robin Hood Tax was a key component of their manifesto and heralds the start of a more responsible form of capitalism. Labour followed in the footsteps of European countries who implemented a Robin Hood Tax in 2013. In the years since, it has proven itself as a revenue raiser also capable of reining in the worst
excesses of the financial markets. Last night it proved successful as a vote-winner too. A Robin Hood Tax is expected to eventually raise as much as £20 billion a year in the UK – enough to help reverse the worst of the cuts and get Britain’s economy growing again. In three months a Robin Hood Tax could pay for insulating every home in Britain. In just two weeks, it could raise enough funds to reinstate the Education Maintenance Allowance. But revenue is also sufficient to pay for our international development and climate change commitments internationally. Obama, now in his second term, complimented Miliband for his ‘global leadership’ (see ‘Obama heralds Labour as ‘global leader’ for commitments to Climate Change’, page 4) and has paid close attention to the initiative, planning a similar tax himself next year. To mark the occasion Gordon Brown turned up in his constituency of Kirkcaldy and Cowdenbeath to cast his vote wearing a green Robin Hood hat. During his phone call to Mr Miliband to congratulate him on the result, David Cameron is rumoured to have said “I wish we’d gone for it now”.
Former Barclays Chief Executive Bob Diamond and the bank’s former head of investment banking Rich Ricci are set to release a charity single entitled ‘Giving is the New Taking’ in support of the Robin Hood Tax campaign. They are planning the release as a thank you to the campaign for helping to save the sullied reputation of their sector. The announcement of the popular Financial Transaction Tax or ‘Robin Hood Tax’ has reversed years of public antipathy for the UK banking sector, with polls showing that 85% of people now believe the major high street banks now perform a good or very good social function. Bank bosses last year agreed to drop their multi-million pound PR campaign against the tax – which came to light after an investigation by this paper last year. “A year ago polls still showed a serious level of anger and mistrust around banking, which was bad for staff morale, business, and ultimately our stability in the UK” said Ricci.
“We were spending millions fighting Robin Hood Taxes in Europe and in the UK and it was only making our position harder. It was clear that publicly resisting a small tax was doing us greater harm than simply paying up.” Asked about their musical influences the pair looked less sure of themselves. “We were both big
fans of Robson and Jerome” says Diamond “and if soldiers can sing a love song, I am sure bankers can sing a charity single”. The single can be downloaded or is available to buy in all Barclays branches. Funds will be used by the Robin Hood Tax campaign to support the US sister campaign to tax Wall Street.
How a Robin Hood Tax works (and how it took the world by storm) Labour are not alone in their desire to implement a Robin Hood Tax. Many European nations, including its biggest economies – France, Germany, Spain and Italy - have already done so, raising tens of billions of euros in additional revenue annually. The second term Obama administration have indicated that they hope to do the same by this time next year. A Financial Transaction Tax, a Tobin Tax, or a Robin Hood Tax, are the many different guises for the same basic principle of a low rate levy (between 0.1 per cent - 0.001 per cent) on the vast volume of financial transactions. The tax will not apply to ordinary businesses or bank customers, but is targeted at financial institutions such as banks and hedge funds. In particular it will target some of the most socially useless trades that are no longer carried out by humans but by computer algorithms, a trend that spiralled out of control as early as 2012. Because the markets have grown so large, the tax is capable of raising as much as £20 billion in the UK every year. Money that could be invested in schools, hospitals and public services, used to
kickstart the green economy and help to fulfil the UK’s international commitments. The financial sector lobby have feared its implementation precisely because it is one of the hardest taxes to avoid. Shifting trades to New York or the Cayman Islands makes little difference to the Treasury’s ability to collect the tax back here in the United Kingdom, a point already proven by the UK’s long established Stamp Duty – a 0.5 per cent tax on share transactions. Our economy suffered the deepest and longest recession of a generation - thousands were pushed into poverty and tens of thousands more lost their jobs. Yet thanks to bank bailouts, subsidies and tax breaks, financial institutions were protected from feeling the effects of the crisis they caused. Anger fuelled protests, which in turn put pressure on politicians to act. The Robin Hood Tax was favoured by financial and business figures such as George Soros and Bill Gates whilst also enjoying widespread public support. It has become a widely accepted mechanism for a more responsible form of capitalism where markets once again work in the interests of the wider economy and society.
Business lauds Labour’s new economy Entrepreneurs, business leaders and manufacturers welcomed the Labour Government’s pledge to use part of the proceeds from a Robin Hood Tax to fund a British Investment Bank to help increase lending to small businesses’ and fund new infrastructure projects. It is thought to be one of the crucial pieces of the jigsaw that helped produce Ed Miliband’s thumping majority and it will end years of a credit drought where banks hoovered up fresh credit, starving businesses of loans and stunting our economic growth. One house builder from Ipswich spoke of his frustrations
over recent years and his belief that the British Investment Bank would help businesses such as his. “I’ve struggled to raise money to invest in the materials I need to build houses. Banks seem to work against rather than for people like me. I think the new British Investment Bank, with money behind it from the new Robin Hood Tax, is a real step in the right direction.” A manager of a small factory in Gravesham, a key marginal where Labour triumphed by 4,000 votes, claimed her vote had been delivered on the back of the Robin Hood Tax.
“I voted Tory for the first time at the last election – I believed Cameron would cut sensibly whilst helping entrepreneurs like us. But the Coalition talked of growth whilst only helping their friends in the City.” “There’s nothing we need more than banks being brought in line with the rest of our economy.” Interviewed on television during Labour’s victory party, one business leader commented that “the golden age of finance was a poisoned chalice – a return to lending to productive elements of our economy is what’s needed”
Robin Hood Tax myth-busting Financial Transaction Taxes must be global to work Financial Transaction Taxes (FTTs) do not need to be global to work. Over 50 countries have unilaterally implemented FTTs on different asset classes. These include the world’s largest financial centres such as Hong Kong, UK, United States and Japan. Let’s take the example of the UK’s current FTT on share transactions (Stamp Duty) the key design feature is that no matter where in the world a transaction in these shares takes place – London, New York or the Cayman Islands – the tax can still be collected in the UK. This severely limits the opportunities for avoidance. The IMF has itself concluded that FTTs in general “do not automatically drive out financial activity to an unacceptable extent”. A Financial Transaction Tax would damage economic growth In claiming FTTs would be bad for growth, critics ignore the positive effect billions in additional revenue could have on the economy through, for example, job creation, infrastructure
investment and poverty reduction. Critics also ignore the longterm benefits of improving market stability through reducing high-frequency ‘noise’ trading. The tax is not as radical as its opponents like to make out. Many far larger transaction costs already exist - trading commissions, spreads, clearing, settlement, exchange of fees and administration costs for example. A Financial Transaction Tax would only be a fraction – 10% – of the overall costs. Ordinary people and pensioners will end up paying The tax would impact on investment banking and not retail or high street banking. 85 per cent of trades that would be FTTliable are carried out by banks and other financial institutions, such as hedge funds, whose clients are often high-net-worth individuals. Ordinary people do not, by and large, trade assets such as bonds or derivatives. The FTT rates are set extremely low precisely to avoid having an impact on pensions, ordinary investors or savings. The vast majority of pension funds pursue buy-and-hold strategies, turning over their portfolio on average once every two years.
Free healthcare for poorest in Africa as Robin Hood Tax guarantees future funding enues from the Robin Hood Tax will be invested in free healthcare in Sierra Leone, as well as Ghana, Burundi, Liberia and Malawi.
A trained midwife at Korle Bu Teaching Hospital in Accra, Ghana, attends to a newborn baby girl Abbie Trayler-Smith
Planned cuts to free healthcare programmes in five developing countries have been reversed, following the guarantees of continued funding from the UK’s Robin Hood Tax.
Prime Minister Ed Miliband made the pre-election pledge as leader of the opposition in a visit to Sierra Leone last November. The visit took place as falling levels of aid threatened to force the
Militant bankers to set up ‘Occupy’ protest camp A small group of bankers are planning to set up ‘Occupy’ protest camps outside local hospitals, schools and police stations, livid that a proportion of their bonuses will be used to fund public services. The group, known as ‘Bankers4Justice’, claim the new Robin Hood Tax breaks the agreement whereby the public foot the bill whenever bankers make mistakes. One protestor held a sign asking “Whose side is the Government on here?” Bankers4Justice say they have been hit by a double-whammy: multi-billion pound state subsidies are drying up, meaning they must compete on a level playing field with other industries, just as the Government are asking them
to pay their fair share in tax. This select group of disgruntled bankers have set themselves apart from the rest of the industry that remains largely unaffected and indifferent to the tax. Confident that they themselves would never need to rely on the public services that have been cut in order to pay for their mistakes, they have decided to take the fight to the horse’s mouth. One such demonstrator stood asking Year 6 pupils outside a primary school “Where have all the good times gone?” Though not accustomed to tents, the group are rumoured to have bulk purchased luxury camper vans complete with modems and wireless internet so they can stay connected to the international bond markets.
withdrawal of the country’s commitment to provide free healthcare to pregnant and lactating women. The Labour Government has now confirmed in phone calls to presidents and embassies that rev-
A future guaranteed In Sierra Leone, the importance of this measure is hard to overestimate. In a small clinic on the outskirts of Freetown a first time mother is gently nursing her tiny boy – born by caesarean section the night before. She explains that her older sister had died in childbirth as the family could not afford medical fees. In contrast she was the beneficiary of Sierra Leone’s 2010 commitment to provide healthcare free at the point of use in an effort to reduce maternal deaths. “There is no way I could be here today with my son if we had to pay for the operation” she says, “I would have died at home like my sister”. Hospital staff report that numbers of women coming for
health checks have grown steadily since user fees were removed in 2010. However, finance had become a significant problem as donors increasingly opted to finance healthcare on a projectby-project basis, rather than channelling revenues through the central health department. Uncertainty over funding had led some hospitals to start unofficially charging user fees, a significant barrier to Sierra Leone’s poorest people. Oxfam’s Sierra Leone country director Ravi Sodha said, “We’ve seen the evidence since 2010 that the removal of user fees for healthcare was the most powerful tool for protecting poor mothers and their children. The introduction of the Robin Hood Tax means funding is now guaranteed and scaling up of the programme means thousands more women are able to make sure that the joy of a new baby does not become tragedy.
A Robin Hood Tax will reverse five years of austerity
The banking bailout in the UK cost around £1.5 trillion in total, or £31,250 per person (94.4% of GDP). Five years of cutting public services and choking economic growth was the legacy left by the banks’ reckless behaviour.
In the UK over 13 million people live in poverty. That’s one in five people who have to choose between switching on the heating or buying enough food to put a meal on the table. In the UK over 13 million people live in poverty. That’s one in five people who have to choose between switching on the heating or buying enough food to put a meal on the table. 1.7 million children in the UK live in severe poverty without basic necessities such as clothing and food.
This, taken together with regressive tax measures such as the increase in VAT from 17.5 to 20 per cent which hit the poorest twice as hard as the rich, has made a bad situation worse. Politicians have shifted the debate from how we deal with the economic crisis to reducing the debt by cutting public spending and services. But in order for Britain to emerge successfully from this protracted recession we need to maintain and strengthen our public services. This is where a Robin Hood Tax can help by asking those with the broadest shoulders – those most responsible for the largest economic crisis of a generation – to pay their fair share. 50 per cent of funding from a Robin Hood Tax on financial institutions will be used domestically, as much as £10 billion a year that will make a massive difference to people’s lives. It will help to end child poverty, reform the welfare system, end fuel poverty and protect frontline services. It is the start of the financial sector once again working for, and not against, the interests of the rest of society.
Friday 8th May 2015
The not FT Editorial Unbridled rampant casino capitalism has had its day
Admittedly, at times we have supported the City’s swagger, but ultimately it proved to be its own worst enemy. Tripping and falling not just on itself, but on the rest of our economy. We applaud the Labour party for its bold step of rebuilding a more balanced Britain away from the capricious excesses spilling out from the Square Mile. It is time we refocused on the other 84,000 square miles that make up these Isles. In the latter half of the 18th century, putting to rest the tyranny of feudalism helped open up the economy to the ingenuity of Britain’s populous. Competition bolstered our economy, and opportunity made our society more equal. The same can be said today: the iron grip of the hallowed and gilded elite has begun to be prized open; making space for SME’s to drive Britain forward.
At the same time as the curtains were drawn on feudalism, William Pitt the Younger’s idea of an income tax was introduced. At first branded madness, fears were spread that it would bring the economy to its knees. Yet it was implemented with resounding success. Fast forward two hundred years and the tax is a mainstay of all developed nations. Again, there is a parallel – the Financial Transaction Tax is a global form of redistribution suited to the globalised economy. It is capable not only of raising much need resources in the United Kingdom but providing a stable and reliable source of revenue for developing countries as well. For decades Financial Transaction Taxes have functioned successfully around the globe, Europe recently increasing both the size and the scope of such taxes. This has not caused the sky to fall in. Bankers have not had to huddle together under these very pages to keep themselves warm, it has done little more than help markets return to their real function – the efficient allocation of capital. In short, we have surprised ourselves at our enthusiasm for the tax, ultimately convinced the financial sector can best avoid consigning itself to the scrap heap of history by restoring the severed link between the markets and the society they once used to serve.
Obama heralds Labour as ‘global leader’ for commitments to Climate Change Thanks to 25 per cent of proceeds from Labour’s Robin Hood Tax being used to fund climate change adaptation and mitigation, Obama, now in his second term, praised Labour for showing ‘global leadership’. Though countries have promised funding to tackle climate change, they are struggling to fulfil their obligations as a result of banks derailing our economy in 2007. This leaves the world perilously under-equipped to tackle the most serious threat facing humanity. Thanks to the Robin Hood Tax, this is now starting to change, as those who benefitted most from globalisation and development will give something back to those who have benefitted the least. A Robin Hood Tax will provide billions in revenue to help countries such as Vietnam - one of the most vulnerable countries in the world to climate change despite being one of the least responsible for greenhouse gas emissions.
This is particularly worrying, as Vietnam has enjoyed one of the best development records in recent years of any country in the world. Doing more than most to meet their Millennium Development Goals, they reduced the proportion of people living in poverty from about 58 per cent in 1993 to 18 per cent in 2006. In Vietnam, for example, funds from a Robin Hood Tax will help people build raised platforms in their homes to escape rising flood water. This has been identified as one of the greatest threats to life, especially for women living in the area. Funding will be made available for more expensive types of rice seed with shorter crop cycles, and more resilient crops like lotus plants will be planted, meaning less money will be needed to prepare for emergency responses when disaster strikes.
Square Mile braced for busiest day ever The ‘Mass Exodus’ of banks on the advent of Robin Hood Tax becoming a reality has not materialised. Tumbleweed failed to clog up the escalators at Canary Wharf as predicted. Flights to New York, the Cayman Islands, St Trope and other financial outposts are also reported to be down on the announcement. Bankers who had threatened to leave are instead planning on staying put, buoyed by the news that Estate Agents have once again overtaken them as the most hated profession. “You’re kidding if I’ll go to some insect-infested tax haven just to avoid a tax of 0.1 per cent” one commented.
The ‘Mass Exodus’ of banks on the advent of Robin Hood Tax becoming a reality has not materialised. Previous plans by a consortium of the world’s largest banks including Barclays, Goldman Sachs and JP Morgan to set up a tax haven in space to avoid a Robin Hood Tax have been put on ice. The consortium had hoped to convert a disused Russian space station - Mir - that is currently orbiting 600 miles above the earth’s
surface into a ‘space haven’, with state-of-the-art computer and satellite technology, allowing banks to take advantage of operating
within a vacuum. But analysts conceded it would be cheaper just to stop moaning and start paying the tax.