Last week the European parliament voted in favour of the Financial Transaction Tax, also known as the Tobin Tax, after the economist who promoted it, and now, in a stroke of presentational genius — and extraordinary mendacity — dubbed the “Robin Hood Tax”.
Yesterday I did a pre-record for the BBC East Midlands Politics Show, which should go out on Sunday 13th, and should be available on I-Player thereafter. I was head-to-head with Sophia Ireland of the Robin Hood Tax Campaign, who is an OxFam activist in another incarnation. Labour MEP Glenis Willmott had been booked for the show but cancelled in favour of a conference-call with Ed Miliband — an odd sense of priorities.
The case for the tax is simple. It’s pay-back time for the banks. After all the public money they’ve had, we want some back. So we’ll impose a tiny tax — only 0.05%. But this will still raise £20 billion in the UK, which we can use to mitigate “The Cuts”. We can spend it on widows and orphans, and university fees, and the Health Service. We’ll kill two birds with one stone, and impose fairness at a stroke.
The whole idea is so naïve and simplistic that I’m astonished that anyone falls for it. Yet I’m told that 80% of voters and 75% of Conservative voters approve.
They conveniently forget that Robin Hood stole from wealthy tax collectors — like the Sheriff of Nottingham — and returned the money to the hard-pressed populace. This Tobin Tax takes the money from all of us, and gives it to Brussels, which will spend it on pet projects and wasteful subsidies and generous expenses. Be in no doubt — MEPs voted for it, and the Commission will propose it, because they are hell-bent on creating “Own Resources” for the EU — that it, direct EU taxes to fund an inflated EU budget. It will not go to the UK Exchequer, still less to our widows and orphans. It’s a Sheriff of Nottingham tax, not a Robin Hood Tax.
They forget that the government has already imposed a banking levy — which has caused HSBC to contemplate leaving the UK. Sophia says that of course banks won’t leave — they’re growing fast and recruiting like mad. She has failed to notice that this is merely a short-term recovery from 2009, not a guarantee for future years.
The Robin Hood Tax Campaign can’t have it both ways. Either it’s a trivial tax — “only 0.05%” — in which case it will have no effect. Or it’s a £20 billion body-blow to one of the UK’s key industries. Of course on their own admission, it’s the latter. And it’s a uniquely anti-British tax. Because the City of London is the financial capital of Europe, and is where the vast bulk of financial transactions take place, this tax proposal is hugely skewed against the UK. Other member-states will pay relatively little. Yet Labour MEPs voted for — a vast own-goal.
They say that this tax will only affect the bankers, and will leave the rest of us untouched. But of course any tax applied to an industry filters down, in the end, to the man or woman in the street. It will affect everyone with a bank account, or a mortgage, or an ISA, or a pension fund, or an annuity. It will add to costs for anyone raising capital for a small business. It will make the UK, and the EU, less attractive to inward investors.
A couple of weeks back I was in Hong Kong, with the Director of Inward Investment Simon Galpin. They’re working hard to attract the headquarters of global companies, with banks high on their list. HSBC is tempted. Labour MEPs seem to forget that we live in a globalised world. Banks and other financial institutions can go to Zurich, or Hong Kong (where personal tax is 15%), or Singapore, or New York. We already have a tax régime in the UK which is actively driving financial operators and high earners out of the country. This new tax would make matters much worse. Indeed like many new taxes it might result in less revenue, not more. It is lunacy on stilts.
So what next? We have to hope that the Council — the member-states — will simply say NO. This will be a challenge for George Osborne. Since this is effectively a tax on the UK, it may be difficult to find allies in opposing it. But he must do that, or we shall have a disaster on our hands.
(Hat-tip to ConservativeHome for publishing my piece yesterday)