Monthly Archives: November 2011

Unexpected positive voices from the City

George Osborne lets the finance sector off the hook once again, whilst David Harding, Founder of WInton Capital provides support for a European FTT

Something strange is happening!

Proposals for a financial transaction tax have received support from some unlikely sources.

A few days ago, David Harding, Chief Executive of one of London’s biggest hedge funds, $26 billion Winton Capital, gave support to a European Financial Transaction Tax. Mr Harding said “I would be in favour of a low [financial transaction tax], if part of it was used to finance more supranational regulation of markets.” Not only this, but he also said that this type of tax would be a “step in the right direction.” This puts Mr Harding, one of the biggest donors to the Conservative Party, in total opposition to the views of the Chancellor.

Interestingly, Mr Harding also seems to believe that the Treasury has the interests of the financial sector ahead of those of the public, “I am surprised at the degree to which the Treasury and the FSA (Financial Services Authority] act as lobbying organisations for the financial services industry” he said. Indeed. So are we.

This followed another financial heavy-weight’s comments that the UK is in danger of becoming “too precious” about the threat of an FTT. Stephen Hester, Chief Executive of the Royal Bank of Scotland, pointed out to the Treasury Select Committee that Britain already has a tax on stocks and share transactions, known as the Stamp Duty.

This is all in stark contrast to our Chancellor’s budget announcement yesterday. Gloomy news all round. Osborne reiterated his opposition (to hearty cheers from his Conservative backbenchers) to an FTT, ignoring the need to promote global health and alleviate poverty in the UK and abroad. Furthermore, he has let the bankers off the hook once more: Osborne has simply re-announced the £2.5bn a year bank levy that he has already imposed. His sleight of hand was today that the levy had been increased to 0.088% because the previous rate he had stated had been too low to raise this target amount. In so doing he implies the banks are being hit like the rest of us when of course they are not.

We are so not all in this together.

David Hillman, spokesperson for the Robin Hood Tax campaign said “bankers will breathe a collective sigh of relief that the Chancellor has again sided with the 1% against the 99%”

After claiming that they would support an FTT if implemented globally to launching an all-out attack on it post-G20, the actions of the Government are certainly not representing public will. However, with the FTT being discussed in the House of Lords on the same day as the Autumn Statement, progress is being made everyday: 2012 is going to be an exciting year. Watch this space.

By Abi Ramanan – Policy and Communications Officer, Stamp out Poverty


The FTT makes it to the House of Lords

David Hillman, director of Stamp out Poverty, and Richard Gower, a senior policy advisor from Oxfam took the case for the FTT all the way to the House of Lords, to the EU Economic and Financial Affairs and International Trade Sub-Committee (phew) to be precise.

This proved to be an extremely interesting session with our advocates presenting the main positives of implementing an FTT, and just to re-cap, these are:

1) Revenue raising ability (in the region of £20 billion annually in the UK alone)

2) To reduce high-frequency speculative trading leading to a more stable financial system going forward

3) To compensate for the implicit subsidy that banks receive from the Government which provides them with cheap borrowing compared to other sectors and therefore, disproportionate profits.

4) Technically simple to implement and collect

5) Huge amount of political momentum behind FTTs at the moment, particularly from Germany and France

6) FTTs are equitable and progressive – they will fall on the richest institutions and individuals in society

John Vella, from Oxford University’s Business Taxation Centre, agreed that the financial sector should be taxed more but felt that a Financial Activities Tax (FAT) (a tax on excessive profit and very high remuneration) would be a better solution. However, the FTTs advantage over the FAT is that it will help regulate financial markets whilst simultaneously raising significant amounts of revenue which could be used to fight poverty in the UK and abroad. It makes sense. Act now:

To check out David and Richard in action, click here:

Why is George Osborne siding with the 1%?

It’s time to breakdown the tired old arguments that our Chancellor seems to be churning out against a Robin Hood Tax recently. The Coalition government (Lib Dems as well as Conservatives) has decided to side with the 1% against the millions globally who are calling for a financial transactions tax (FTT) to raise money to tackle poverty at home and abroad.

Osborne’s strategy is to ignore the positives and exaggerate negative impacts of the tax. In doing so, he is creating a dense fog of bad economics and misinformation designed to scare away potential supporters.

Let’s deal with the bad economics first. At last week’s meeting of European finance ministers, Osborne insisted that the tax would be paid by pensioners. This couldn’t be further from the truth. The suggested rate of FTT is tiny, at an average of 0.05% or 50p in every £1,000, precisely to avoid damaging important longer term investments like pensions, where a usual strategy is to build a strong portfolio which grows in value. A tiny transaction tax tax paid at the time assets are bought would be an inconsequential cost over the lifetime of the investment.

Instead, an FTT would target high frequency trading, increasingly carried out by computer-generated algorithms (some 70% of trading now carried out on the New York Stock Exchange is by computers.) This sort of trading has been described as ‘socially useless’ by Adair Turner, Chair of the Financial Services Authority.

Osborne also claims that not a single bank would pay the FTT. But if this is true, why are they lobbying so hard against it? Granted, that when banks act as intermediaries they would not pay the tax, but banks often act on their own behalf which means that along with hedge funds and high net worth individuals, the tax burden would fall on them. The IMF has said the incidence of an FTT would in all likelihood be highly progressive – being paid by the richest in society, rather than by the likes of you and I.

Now for the misinformation: the Chancellor argues that a 0.05% tax on banks and hedge funds would be bad for jobs and growth. He uses the European Commission’s impact assessment to claim it would lead to a 1.76% drop in long-term growth across the EU, when in fact the document concludes that a drop of 0.53% is much more likely. Furthermore, this would be spread over 20 years making the impact minimal.

Also, crucially, the EC’s assessment makes no calculation of the positive impact the revenue from an FTT could have, which would be considerable. While potential job losses would be on city trading floors, beneficiaries would be teachers, nurses and other public servants.

The biggest threat to long term growth, is an out of control financial sector.  Indirectly, UK economic input fell by 27% or $49 billion as a result of the systemic crisis precipitated in 2007. Casino banking may add numbers to GDP but it is of little value to the real economy and ordinary people’s lives. An FTT could help rebalance finance in favour of the real economy.

Earlier this year the government increased VAT – the transaction tax we all pay in the real economy – by 2.5% to 20%, VAT has been shown repeatedly to curtail growth and hit the poor hardest. Some may find this extraordinary but whilst the VAT increase affects all of us, financial sector transactions remain VAT exempt. A point not lost on the IMF, who flagged it up in a report to the G20.

The Chancellor’s position that the banks would flee the country or that FTTs need to be global to work is disingenuous. The single biggest piece of evidence for this is the UK Stamp Duty on shares. Implemented unilaterally and modernised into its present form by a Conservative government in the 1980s, this FTT now raises more than £3 billion for the Exchequer each year without any significant loss of business from the UK.

It is ironic that the UK, a world leader on aid, is blocking a wider agreement for a Robin Hood Tax that would help other countries meet their obligations to the world’s poorest.

Ultimately, George Osborne’s position on the Robin Hood Tax comes down to politics.

For 18 months the government has tried to have it both ways, courting public opinion by supporting a global tax in the hope it would never happen. But the very real prospect of a European tax has forced them to choose.

By opting for the wishes of the 1% in the City ahead of the needs of the rest of us, he risks public anger and a place on the wrong side of history.

Bill Nighy supports a Robin Hood Tax in Cannes

Bill Nighy, the Robin Hood Tax campaign's spokesperson, poses with nurses campaigning for tax justicelong-standing advocate of the Robin Hood Tax

Bill Nighy, a long-standing advocate of the Robin Hood Tax campaign, took our agenda all the way to the G20 in Cannes. The other Bill (Gates) also presented his excellent report advocating a Robin Hood Tax to G20 leaders as the solution needed in order to raise much needed revenue to meet the Millennium Development Goals.

President Sarkozy spoke in favour of taxation of financial transactions at the final press conference in Cannes arguing that they are ‘possible, financially indispensable and morally inarguable.’ He was not alone in expressing his support as a ‘coalition of the willing’ emerged, including Germany, Spain, Brazil, Argentina, South Africa and the African Union, amongst others.

Even as the press conference went ahead, thousands of nurses marched in New York in favour of a Robin Hood Tax, using the slogan ‘put the interests of Main Street ahead of those of Wall Street.’ We had a chance to meet a few of these nurses, and have to confess, they’re our heroes.  As one nurse said “We’re trying to embarrass our politicians into acting in the interests of the people, like we do everyday.”

In other exciting news, Rowan Williams, the Archbishop of Canterbury has announced that he supports the Vatican in their call for a Robin Hood Tax, bringing the number of high-profile advocates of this campaign to an all-time high. The real thanks, however, must go to the hundreds of thousands of people all around the world who are being put second by their governments who favour instead financiers and bankers.

The hunger for change is vast and with momentum and support being gained on an almost daily basis, the time for a Robin Hood Tax is now.

Bill Nighy with Stamp out Poverty's Christina Ashford

Tax havens: 1% haven, 99% haven’t

Location: Cap, D’Ail, French-Monaco border

Purpose: Protest in favour of regulating tax havens – taxes are a social contract with society and by allowing companies to ‘creatively’ avoid them we are pushing developing countries further into poverty.

Monaco, is, of course, one of the biggest tax havens in the world. So, what does this mean?

Tax havens provide a ‘smoke-screen’ enabling multinationals to systemically avoid paying tax and as a result draining profits out of developing countries.  They allow companies to transfer money from developing countries, where it was actually made, to places like Monaco and the Cayman Islands where a much lower tax rate exists. This deprives developing countries of desperately needed tax revenue which could otherwise be used for health or eduction.

Several hundred activists, from around the world, took part (including from ATTAC, Oxfam GB, Oxfam France & Stamp out Poverty.) The overall message of this protest, as with the Alternative Summit in general, is that governments should put their people first and not financial markets.

G20 Alternative Summit

The Stamp out Poverty team headed over to Nice for the Alternative G20 Summit and we had an incredibly eventful three days – activism, campaigning, protesting, workshop-ing…we did it all. Here’s our breakdown of the Alternative G20 in terms of tax justice related issues.

The crowd present at the Alternative Summit was international and diverse – formed from activists and campaigners from around the world, mainly protesting about the links between the debt in the global south and the adverse effects that this is having on people everywhere from London to sub-Saharan Africa.

The first day of action was in the form of a protest which featured over 300 Robin Hood’s marching in Nice ahead of the G20 Finance Ministers meeting. A Robin Hood Tax is a tiny tax on banks which would generate around £20 billion (in the UK alone) which would be used to protect public services at home and ensure that the UK sticks to its international aid commitments – I’m sure that most of you know this though.

The highlight of the protest was definitely the semi-naked flash mob, which featured the French (but not the more prudish English) activists stripping off to reveal ‘0.05%’ written on their stomachs. Innovative. This action received wide-spread press attention, including front-page articles in several of the local newspapers.

The entire march (featuring around 10,000 protesters in total) was provided a beat by several incredible dummers who kept up the energy of the crowd throughout.

The purpose of this protest was to really pile the pressure on the G20 leaders, support President Sarkozy and strongly urge David Cameron not to block the tax at the summit.  The slogan ‘we are the 99%’ has become commonplace in recent months and the protest reflected this sentiment – world leaders such as Nicolas Sarkozy and Angela Merkel have taken notice of this by providing staunch support for financial transaction taxes.  More than half of Conservative Party donations now come from the City – we should continue to lobby the UK government who seem to be taking the side of their friends in the City over the public.

The police presence was more than considerable but as it turned out, completely unnecessary; this was one of the most peaceful, well organised and enjoyable protests that we’ve ever been too.

An Oxfam stunt: selected 'G20' leaders signing the legislation to adopt a financial transaction tax

The Swedish example – facts and myths

Over the past couple of weeks, the Robin Hood Tax campaign has been hitting headlines across the globe. However, it’s not all positive, and some of those arguing against moves to introduce an FTT are trotting out the same tired example of the unsuccessful Swedish FTT as ‘proof’ of why an FTT would never work.

There’s lots of evidence to show why the FTT would work, be easy to implement, and raise billions for good causes. There are also examples of dozens of FTTs across the globe which can show us just how easy and successful FTTs can be (including 7 of the G8 countries).  Indeed one of the most successful FTT is the UK’s stamp duty.

But let’s look at the Swedish example a little more closely to see what opponents of the FTT are worried about.

The Swedish FTT was first introduced in 1984 and scrapped in 1991. Most experts agree it wasn’t a particularly successful FTT and did lead to a reduction in trades made in Sweden. So, does this mean that critics of the Robin Hood Tax are right and that, if we don’t want trading to go elsewhere, we shouldn’t introduce the FTT?

Well, to put it simply, no: they’re not.

Let’s look at the UK as an example to compare with the Swedish case.

The UK stanp duty falls on shares. If you sell a share of a UK-registered company, you pay a small FTT of 0.5% on the transaction regardless of where you are in the world. So, it’s an easy tax to implement and difficult to avoid.

However, the Swedish FTT was only imposed on transactions which took place in Sweden. If the transaction involved a Swedish company but was made outside of Sweden, the transaction was exempt from the tax. This meant that many trades were simply made elsewhere to avoid paying the tax, regardless of whether they involved Swedish registered companies.

Ultimately, the Swedish FTT was badly designed and therefore not very effective. But to say that just because there were flaws in the Swedish FTT that all FTTs won’t work is a bit of a slippery slope argument that doesn’t really work.

It’s a bit like making a sponge cake without any raising agent. It won’t work, but that doesn’t mean that the idea of a sponge is a bad one. Simply by changing the recipe slightly, you could have the perfect sponge.

The Swedish FTT wasn’t designed well, but with better design it could have been a great tax.

Just like the Robin Hood Tax – a great tax whose time is now.