William Hague criticised Labour's support of a 'Tobin Tax’ at PMQs last week. In doing so, he misrepresented economic opinion and the views of other countries.
While deputising for David Cameron during PMQ’s last week, William Hague adopted the role of chief Tory inquisitor and criticised Labour for pushing the idea of a global financial transaction tax, also known as a ‘Tobin Tax’. In doing so, he misrepresented economic opinion and the views of other countries.
Hague claimed “the Prime Minister’s Tobin tax on transactions”:
“has been rejected throughout the world and was ridiculed yesterday by the Governor of the Bank of England?…
“The Governor of the Bank of England said that President Obama’s proposal is much more serious than the Prime Minister’s Tobin tax. In fact, the Governor said that he could not think of anyone internationally who was enthusiastic about the Prime Minister’s idea.”
This was a remarkable statement to make as both France and Germany, along with the President of the European Commission have expressed strong backing for the Tobin Tax. In December, the 27 heads of the EU in their joint communique, expressed early support for the tax and called on the IMF to assess and study the proposal:
“The European Council encourages the IMF to consider the full range of options including insurance fees, resolution funds, contingent capital arrangements and a global financial transaction levy in its review.”
Mr Hague further claimed that “President Obama’s proposal is much more serious than the Prime Minister’s Tobin tax”. This despite 200 leading economists in the US signing an open letter in December 2009, arguing that financial speculation in the computerised world has led “to an enormous explosion in trading volume, with most trades having little economic or social value and redistributing disproportionate resources to the financial sector.” They call for the introduction of “modest” global financial transaction taxes.
Closer to home, the head of the UK Financial Services Authority has expressed support for the proposed idea, decrying some trading activities in the financial world as “socially useless”, that needed to be curbed with global transaction levies. Though not universal, there is a welter of support internationally for the Tobin Tax. The Conservatives should take stock when next crafting their economic rebukes against the Government.
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11 Responses to “The Tobin tax does have international support, Mr Hague”
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rob
The yanks hate it and so does the bank of england gov. I would put money on this not happening.
Tyler
Tobin tax would smash financial market profitability. Which accounts for a huge % of UK (let alone global) GDP. It will never happen, and if it does, it won’t last long as every bank and hedge fund moves offshore. Lets not even think about how much damage it would do to any import/export business as well – tax costs will get passed down making industry less competative.
Sounds like an idea only Labour could really have.
rayhan
Yes, the US administration is not currently supporting the idea, but not all the “yanks” hate it. As I highlighted, 200 leading economists have recently signed an open letter declaring their backing for the proposal.
Tyler, the Tobin tax would not smash financial profitability. The whole point of the scheme is to curb risky and short-term speculative trading, and thus protect the long-term profitability of the financial and international currency markets. This will help to reduce the volatility and insecurity in the financial system, and encourage more sustainable currency trading. I don’t dispute that this will be difficult to establish, but there is a global appetite for a new financial structure and it would only take a few big financial centre’s to get on board for this to get going. You state this counts for a huge % share of UK GDP, but that is no reason not to support this idea. If anything, it makes the case for it even more compelling as it demonstrates just how exposed and over-leveraged the national economy is to the financial industry. The Tobin tax will help generate the funds necessary to protect the economy in the event of a future collapse, and also contribute billions to global aid, development, and climate change efforts, bringing back a sense of ‘social value’ to the financial industry.
The Austrian government recently conducted a study into this idea, and concluded that an international levy on financial transactions at a rate of 0.05%, would generate $750 billion globally. Britain itself would collect $100 billion. This is based on the implausible scenario that there is a 2/3 drop in financial trading. So as you can see, the international community could generate huge amounts of revenue from this.
Also, countries if they choose to, can successfully take unilateral action on this to protect their economies. For instance, Brazil has just adopted what is seen to be the first Tobin tax on foreign investment portfolios. A 2% levy on all foreign financial investment inflows into Brazil will help to reduce hot money inflows and unwanted speculative trading. And Russia recently announced that they were now looking at adopting a targeted tax on financial transactions, so the momentum and support for this initiative is building.
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