|Take from the rich, |
give to the poor,
shoot the odd arrow.
They do say the simpler an idea, the more likely it is to succeed. And the Robin Hood Tax is a pretty simple idea.
In 2001, the charity War on Want published a proposal for a tax on speculative trading on the international currency markets. The effect was to be twofold: to generate global revenues to be applied to fighting poverty across the world; and to reduce the risky trade in world currencies which had contributed to the East Asian financial crisis of the late 90s. A bona fide win-win. Charities and progressive groups applauded. The markets and the governments in their thrall shook their heads and carried on with business as usual.
We all know what happened next, of course. The banking crisis of 2008 which precipitated the global recession exposed our absolute reliance on the financial institutions which engage in speculative trading not just in currencies but in a range of other tradables of varying dubiety. But more significantly the period following the crisis, after banks had been bailed out with government debt to be paid off by taxpayers, showed that banks and traders were utterly unwilling to change their behaviour, and that the bailout had only cemented their attitude to risk. Public disquiet turned into anger.
At the behest of campaigners, political leaders started re-floating the idea of a Robin Hood tax. Gordon Brown proposed it at the G20 in 2009, other European leaders offered varying levels of support, but a common concern was that it needed to be a global system for it be successful. So in early 2010 a coalition of major charities, trades unions, politicians, economists and business leaders launched a concerted campaign for a Robin Hood tax.
The preferred model for this tax is a tiny (around 0.05%) financial transaction tax (FTT) to be applied across key trading areas such as stocks, bonds, foreign currency and derivatives. The group estimates this could raise £250 billion a year globally. Because transaction taxes already exist this approach is well-tested, cheap to implement and hard to avoid.
There are other models, not as effective but potentially more able to garner support from governments still cowed by the markets. A financial activities tax (FAT) – like VAT for bankers’ remuneration and excess profits – has the guarded support of the UK government, which is opposed to FTT. But it would raise less revenue and, crucially, have far less impact in reducing risky speculative behaviour in the financial sector.
So the news this week that the European Commission will press forward with a unilateral FTT from 2014 is very significant, in the week that Bill Gates, one of the world’s wealthiest and most successful businessmen, backed it too. It has pushed the UK government into accepting the concept, though they say they will only implement it if it is global. It has increased pressure on the US government, paralysed by the 2012 presidential election and huge legislative bias against tax. And it has legitimised FTT as a practical, effective way to curtail the damage the markets can do.
With London handling about 80% of Europe’s financial transactions, we’re getting close to crunch time. The UK’s decision on the Robin Hood Tax could help to redefine the relationship between government and the market. It could repair the damage done by the banking crisis while massively reducing the risk of it happening again.
In his speech to the Labour conference this week, Ed Miliband talked about opposing predators in the financial sector, and rewarding socially responsible business. The previous week, Vince Cable told the Lib Dem conference he wanted tough interventions in the banking sector to end profiteering at the expense of economic growth.
On Monday, George Osborne has his moment. Will he back Robin Hood? Will he move from the rhetoric of threat to the threat of action? Not yet, maybe. But the more people who call for it the more likely it is that he’ll have to.
So if you think the Robin Hood Tax is a simple idea whose time has come, you can add your voice to the call to make it happen. I have.