Tories call Robin Hood tax “hopelessly naive” – despite its backing by world economists

Just two days since the "Robin Hood" tax launched and already 23,000 people have voted in favour on the campaign's online poll. A deal could be reached in June.

It is just two days since the “Robin Hood” tax launched and already 23,000 people have voted in favour on the campaign’s online poll: 13,000 signed up by email and 21,500 joined the Facebook Fan page.

The Financial Times reported yesterday that Gordon Brown believes the IMF will endorse a global bank levy before its April meeting in Washington, and that an agreement in principle can then be agreed by world leaders at the G20 summit in June.

It follows his response to a question tabled at Wednesday’s PMQs, in which he stated his belief that:

“We will reach agreement on a global financial levy … I believe that we will be able to go ahead with it in the not too distant future.”

Despite being backed by more than 350 of the world’s leading economists and world leaders, the response from the right-wing blogosphere has been predictably lamentable.

Conservative Home led with a blog that described the tax as a “fairytale” that “won’t help anyone”, with centre-right ‘non-party political’ thinktank Reform calling it “hopelessly naive”.

Meanwhile, perhaps taking the Tea Party “revolution” as their inspiration, a “The Robin Hood Tax is a stupid idea!” Facebook page has been set up. It has 31 fans. It appears to be an aggregator of some of the Tory blogosphere’s reaction to the tax.
Here is a selection:

• “It’s lunatic on the very face of it”

• “They’re fucking mad, aren’t they?” – Adam Smith Institute blogger Tim Worstall

• “The last thing we want is to increase benefits or money to those out of work. If it is to be used to help prevent climate change, as I read elsewhere, do we really need another ‘Green Tax’ from this government?”

“The Robin Hood Tax is just there for socialists and other Trots to latch on to a figure of public hatred and propel their communist views”Cardiff Blogger, ranked 26th top Conservative blogger (by Total Politics)

• “This is an absurd concept that pulls figures out of its arse and expects everyone to just believe it” – Conservative candidate for Three Rivers district council Chris Hawes

• An “initiative by the economically illiterate designed to appeal to those who are economically illiterate” – Conservative blogger James Burdett

• “Even though I fear that wading in may make it look even more like the Tory Bloggers have received their marching orders on the Robin Hood Tax I’m going to add my two cents (or should that be 0.005%) to the general condemnation of it” – Stratford Conservative

There are a few common themes running through their arguments which are worth addressing.

Claim #1: It will harm the economy

Nobel Prize winning economist Joseph Stiglitz said this of short-term trading in an interview with the Evening Standard:

“Does anybody seriously believe that anything happens because of the sort of micro-second trading we’re now seeing? It’s a function of speed. No investments are being made as a result of it, no jobs are being created.

“Finance has a vital socially important role to fulfil, which is to raise capital, to run payment systems, to oil the wheels of everything society does. But the bankers fail to perform that socially useful function — and because of that, the world’s economy has suffered.”

Claim #2: It will harm ordinary consumers, including ‘holidaymakers when they exchange money at the airport’

The Robin Hood tax campaign FAQ states that:

“The Robin Hood Tax will not impact on personal banking or on retail banking. That’s because it targets a distinct area of bank operations – high-frequency large-volume trading, undertaken by financial institutions in the ‘casino economy’.

“If you change money to go on holiday, send remittances abroad, invest in a pension fund or take out a mortgage, you will not be affected by this tiny tax.”

Claim #3: It will never work because a global agreement will not be reached

Gordon Brown said in PMQs that it “must be done by countries working together” – and with Germany and France having previously backed the idea, and the PM speaking of an agreement at the next IMF and G20 meetings, a global bank levy is closer now than at any time since James Tobin proposed the idea.

Adam Lent, the TUC’s head of economic and social affairs, has argued that if enough momentum could be built up to bring the US and Japan on board, then:

“The biggest financial centres will be covered making it very difficult for financial companies to avoid the tax by shifting transactions or operations elsewhere.”

The campaign itself stresses unilateral action could be taken, proposing that:

“While an internationally agreed tax system is the best way to proceed, the UK Government and European Union should start extending transaction taxes already in existence, such as the UK’s 0.5 per cent stamp duty on shares.”

To conclude, no one in favour of the Robin Hood tax is arguing that it is the magic bullet in the war against poverty. The same organisations involved in pushing this campaign have long argued for reform of the international institutions governing globalisation, a fair global trade deal and a fair global deal to tackle climate change, and they will continue to do so.

There is no contradiction, however, in also trying to seize a once-in-a-generation chance to build an opportunity from crisis and push for £400 billion. This is and idea whose time has come.

39 Responses to “Tories call Robin Hood tax “hopelessly naive” – despite its backing by world economists”

  1. Matthew Taylor

    @leftfootfwd See comment on that last piece – the headline is utter nonsense, at best: http://bit.ly/9k2zhv @DavidTaylor85

  2. Matthew Taylor

    @ByrneTofferings Picking them out of context too: http://bit.ly/9k2zhv

  3. Parlez~me~'n~Tory

    Naughty Naughty! RT @MTPT: @ByrneTofferings Picking them out of context too: http://bit.ly/9k2zhv

  4. Cardiff Blogger

    Thanks for the link, I posted a rather more positive blog just after – suggesting an alternative – http://cardiffblogger.co.uk/archives/let-the-bankers-help-themselves

    Regards,

    CB

  5. Billy Blofeld

    Socialists are finding it increasingly difficult to tax us over the “climate change” issue.

    They are now starting to turn their fire on banking transactions as the next and easiest massive new tax.

  6. James Graham

    Where is this letter signed by 350 economists? The Oxfam blog you link to refers to it but doesn’t link to it?

    Is what they are calling for what the Robin Hood Tax campaign proposes, or is it a general principle they have leant their weight behind?

  7. Matthew Taylor

    Next time, read the articles you are linking to, before you create more utterly misleading headlines that discredit your journalism

    Claim:
    “Tories call Robin Hood tax “hopelessly naive””

    Reality:
    A website (Conservative Home) which supports, but isn’t part of, the Conservative Party published a comment piece by the Chief Economist of the think tank Reform.

    In it he said that given the failure to agree international trade talks or the Copenhagen climate talks, it was “hopelessly naive” to think that international consensus could be reached on a global financial transaction levy.

    Anyone would think you had Liam Byrne as a sub-editor.

  8. Matthew Taylor

    The full quote from Patrick Nolan of Reform:

    “In the almost 40 years since a Tobin tax was first proposed this idea that has never gotten off the ground. The reason for this is simple – it will never work. For it to work it would require every tax jurisdictions to agree on it. But the international community struggles to agree on trade talks (such as the failed Doha round) or on climate change (COP 15 in Copenhagen), so the idea that an international consensus will arise over a tax issue is hopelessly naive.”

  9. uberVU - social comments

    Social comments and analytics for this post…

    This post was mentioned on Twitter by leftfootfwd: Robin Hood tax is “hopelessly naive” say Tories despite backing by world economists writes @DavidTaylor85 http://bit.ly/aG416f @robinhood…

  10. Bethany

    I’d like to thank this blog for pointing me to the Facebook page against the Robin Hood tax – it now has 32 fans.

  11. Lauren Ivory

    RT @theneweconomics: Great post @leftfootfwd answering concerns about Robin Hood Tax. http://bit.ly/bb5iID #RHT

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  13. Tim Worstall

    ““If you change money to go on holiday, send remittances abroad, invest in a pension fund or take out a mortgage, you will not be affected by this tiny tax.””

    I know that’s what they claim. However, they’re wrong. Try looking up “tax incidence”.

    BTW, Joe Stiglitz is the guy who showed back in 1980 that the incidence of a tax (the economic burden carried) can be more than 100% of the amount the tax raises.

  14. Mark

    I’m sure some reactionary people thought giving the vote to women was lunacy as well.

    But just as some reactionaries say “no”, others seem to be saying “yes” without asking about the research. Most shows it’s near-impossible to implement and it won’t work. See the work undertaken by Sussex University, they write a letter to today’s Guardian.

    Even its creator, James Tobin, abandoned the idea. It would have to be very high to stop speculation; then it wouldn’t raise any money. If it was very low then it wouldn’t stop excessive speculation. It’s not the great idea some think it is.

    And remember the banking crisis wasn’t caused by foreign exchange movements, it was banks over-lending and the light touch regulation of London and New York. Genuine progressives should look for real reform to the banking sector and global regulation, not 0.05% tax rates.

  15. pickles

    Good piece on @leftfootfwd on tackling the critics of the Robin Hood tax: http://bit.ly/bEmm2e

  16. John

    @Mark – it departs a bit from Tobin’s plan by being much smaller – 0.005% against 0.5% (as well as widening out beyond currency transactions). The aim is to make something which is easier to get implemented and primarily will raise money from trading for social good around the world, rather than primarily throwing sand in the wheels as Tobin wanted. If it limits excessive speculation that’s good, but if it doesn’t it raises funds, which is good too.

  17. Yakoub Islam

    RT @pickledpolitics: Good piece on @leftfootfwd on tackling the critics of the Robin Hood tax: http://bit.ly/bEmm2e

  18. Matthew Taylor

    Mike: interestingly, the “Robin Hood Tax” people are at pains to distinguish themselves from Tobin’s proposal:

    “The Robin Hood Tax differs fundamentally from James Tobin’s original concept as its principal motivation is the raising of revenue as opposed to being a way of regulating speculative financial activity.”
    http://bit.ly/b3gUp3

    This does of course further undermine the line taken by David Taylor above.

    David Taylor reproduces their claim that:

    “The Robin Hood Tax will not impact on personal banking or on retail banking. That’s because it targets a distinct area of bank operations – high-frequency large-volume trading, undertaken by financial institutions in the ‘casino economy’. 

If you change money to go on holiday, send remittances abroad, invest in a pension fund or take out a mortgage, you will not be affected by this tiny tax.”
    http://bit.ly/aHR1Vv

    This seems to rely on an assumption that they can define “financial institution” and thereby only target the nasty evil banks and not the nice honest Trade Unionists taking their summer holidays in the Eurozone.

    Given we’re in the middle of a recession caused by dodgy financial regulation (which by over-regulating certain activities and not regulating others creating some pretty obvious problems) the idea that such neat dividing lines can be drawn seems odd.

    If I (as an individual) indulge in some speculative transactions, will I avoid the tax? (If holiday money is excluded, the answer must be yes). I’m not a tax lawyer, but I imagine some of my tax brethren are already sketching some speculative ideas. Borrowing a few ideas from the Lloyds Names system is one approach that immediately suggests itself to me.

  19. Thomas Byrne

    I posted against it here, and I’ve yet to see a decent comeback to it. Hop to it, you ‘evidence based’ bloggers you. http://bit.ly/99XQHF

  20. TUCGlobal

    RT @leftfootfwd Robin Hood Tax "hopelessly naive" say Tories despite backing by top economists says @DavidTaylor85 http://bit.ly/aG416f #RHT

  21. Tina Louise

    Robin Hood Tax wont impact personal or retail banking. Targets high-frequency large-volume http://bit.ly/bEmm2e (via @pickledpolitics) #RHT

  22. Gerdy Rees

    RT @pickledpolitics: Good piece on @leftfootfwd on tackling the critics of the Robin Hood tax: http://bit.ly/bEmm2e

  23. bashmore

    Good knock down of main criticisms of Robin Hood tax by @leftfootfwd http://goo.gl/06NN

  24. Billy Blofeld

    One of the founding fathers of Socialism has a few words relevant to this subject here…..

  25. Will Straw

    Thanks for the comments. There’s also a fascinating exchange on Liberal Conspiracy about this topic: http://liberalconspiracy.org/2010/02/11/why-progressives-should-back-the-robin-hood-tax/#comment-104482

    James – It looks like Oxfam jumped the gun but the letter is in the pipeline. We’ll be the first to post the list of names when it’s published.

    Matthew – I think the headline is completely defensible. An international Robin Hood tax is, in Nolan’s words “hopelessly naive”. He also calls the revenue raising potential a “fairytale”. I don’t think we’re distorting Nolan’s view for one second.

    John – excellent point.

    Billy – Surely you can do better than invoking Hitler?

    Thomas – Am hoping to find time to respond to your genuinely interesting blog over the weekend.

    All the best,

    Will

  26. Billy Blofeld

    Will,

    That is the point. The Tobin tax is plainly as ridiculous as Hitler.

    It will be amusing to see how quickly the “Tobin-Tax-Havens” around the world get filthy rich, leaving the poorest of the world to get poorer.

    ……… but it will all be OK, so long as Champagne Socialists can sleep all warm and cosy at night “thinking” they have done everyone in the world a good turn.

    Of course the reality is that once again socialist policies will be stiffing the poorest up the bum (just faster and on a global scale). Jesus wept.

  27. David Taylor

    Hi everyone,

    Very sorry, I’ve been at work all afternoon so not been able to respond. I’ve got to head home now, but I will respond later this evening.

    Great to see so many comments tho, glad it provoked discussion.

    David

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  29. Merry Men

    You say it will raise £400bn… actually the number should be $400bn. I suspect if the UK introduced such a tax it would indeed be £400bn, as the value of the pound would utterly tank. But let’s not worry too much about that, eh.

  30. Matthew Taylor

    Will – if you think the headline is defensible, you have a fine career ahead of you with one the red tops. I note you don’t bother to address the fact Nolan isn’t speaking for the Conservatives. Your logic might work partly if you’d said “Tories call Robin Hood Tax “a fairytale”” – at least then you’d be using an accurate quote.

    Ended up blogging on this this evening: http://bit.ly/aqaw4x Picks up on David’s three “Claims” towards the end.

    The one he omitted is the biggie – which both Tim Worstall and Thomas Byrne identified – the fact that this tax won’t raise a fraction of the money it’s supporters claim. I’m with Nolan on the prospects for international consensus, and if we could achieve it, wasting it on a tax which won’t raise what it’s supposed to seems a strange move.

  31. David Taylor

    As Will said, we will link to the letter as soon as we can.

    But in the meantime, here is a quote from the Robin Hood Tax campaign press release:
    “The UK campaign is part of an international movement with similar calls being made in the USA, Europe and across the developing world. Gordon Brown, Angela Merkel, Nicolas Sarkozy, Nancy Pelosi, Jose Manuel Barroso, Meles Zenawi (Ethiopia) have all spoken out in recent months in support of some form of transaction tax.

    Financial figures who have backed transaction taxes include Lord Turner (FSA), George Soros, Warren Buffet, Avinash Persaud (chairman of Intelligence Capital), Sir Philip Hampton, (RBS chairman) and Terry Smith (chief executive of money brokers Tullett Prebon).”

    http://www.actionaid.org.uk/102311/the_robin_hood_tax___a_crisis_for_the_banks_becomes_an_opportunity_for_the_world.html

    And as Owen Tudor said on this blog on Monday:

    “The call for a global tax is backed in Europe by Gordon Brown, Angela Merkel and Nicholas Sarkozy. President Lula in Brazil and Prime Minister Zenawi in Ethiopia are keen. So is the Chancellor in Austria, the former head of the Bank of India, the Speaker of the US House of Representatives Nancy Pelosi. Warren Buffet and George Soros, Joe Stiglitz and Paul Krugman – financiers and nobel prize winning economists are supporters.”

  32. Billy Blofeld

    So George Soros and Warren Buffet have backed a “transaction tax”. That is the only clue you should need Scooby.

    Soros bet like fuck on crashing the pound to make his money. These people are happy to bet against the stability of a country for their own personal gain (and I don’t blame them).

    A Tobin Tax is the ultimate one-way bet. You’d have to be really stupid, not to make money off it. Of course these people back it.

  33. David Taylor

    OK.

    @Matthew Taylor, @Thomas Byrne – in answer to claims this “won’t raise a fraction of the money it’s supporters claim”

    Let’s take the $400billion figure. Taking the research done by the RHT campaign, by Schulmeister: http://www.wifo.ac.at/wwa/servlet/wwa.upload.DownloadServlet/bdoc/WP_2009_344$.PDF

    His research – based on hypothetical transaction tax receipts in the global economy 2007 – calculates that if the levy was 0.05%, the maximum range that the RHT called for (down to 0.005%), it would indeed reduce transactions by 65%. However, this would still generate 1.205% of World GDP if the reduction was ‘medium’ or to 0.682% of World GDP if the reduction was ‘high’. See page 13.

    Now, if you take world GDP in 2007 to be $54.9 trillion (using these World Banks from Google’s Public Data site – http://bit.ly/aDFfHB), my calculation is that the tax would raise between $374.418 billion and $661.545 billion.

    Which backs up the Robin Hood Tax claim that:

    “Various experts (Schulmeister (2009) who provides a good summary of the work of others, Baker et al (2009), and our own campaign research) have produced estimates of the tax receipts, using various methodologies. All estimates are in the hundreds of billions of dollars.”
    http://robinhoodtax.org.uk/how-it-works/the-big-idea/

  34. David Taylor

    @MTPT Even if 0.05% was levied with a 65% reduction in transactions = still raises $374bn (0.682% of World GDP) http://tinyurl.com/yavuham

  35. Tim Worstall

    “Various experts (Schulmeister (2009) who provides a good summary of the work of others, Baker et al (2009),”

    Might I suggest that people go and read those two papers? They are the actual justification for the tax after all. Once you’ve done so you can come back and run through the following logical chain.

    1) We do indeed already have a financial transactions tax (FTT). Stamp Duty on shares (The Baker paper specifically uses this as its starting point).

    2) Who bears the economic burden of this FTT? Well ,several pieces of research over the years (Oxcera for one) say that it’s pension funds in hte form of lower pensions and companies in hte form of higher costs for raising capital (which feeds through into lower wages or the workers).

    3) OK, who will bear the eonomic burden of the proposed FTT?

    Any one who says that it’ll be just the banks of the bankers needs to look very hard at point 2) again.

  36. Tank the Tories

    Tories call Robin Hood tax “hopelessly naive” – despite its backing by world economists http://bit.ly/d44ES6

  37. David Taylor

    Here is a link to story in Independent today about the letter.
    http://www.independent.co.uk/news/business/news/hundreds-of-ecomomists-call-for-tax-on-currency-speculation-1899534.html

    “Two Nobel prizewinners, including the outspoken critic of the financial system Joseph Stiglitz, and scores of professors at universities from Harvard to Kyoto, are calling on G20 governments to back a financial transactions tax on speculative dealings in foreign currencies, shares and other securities of 0.05 per cent – say £500 on a £1m transaction.”

  38. diana smith

    RT @touchstoneblog: RT @leftfootfwd Robin Hood Tax "hopelessly naive" say Tories despite backing by top economists says @DavidTaylor85 http://bit.ly/aG416f #RHT

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