How Ed Miliband can become the Tobin Tax’s greatest leader

A financial transaction tax, more commonly known as the ‘Robin Hood Tax’, is a key tenet to Ed Miliband’s vision - with Sarkozy & Merkel, he can realise it.

This week has witnessed the ascension of Ed Miliband to the Labour crown, and with it a new purpose and ambition for the centre left. Central to his campaign was a bold economic prospectus calling for fairness and social justice. A financial transaction tax, more commonly known as the ‘Robin Hood Tax’, is a key tenet to his vision.

Left Foot Forward has previously argued the merits of such a tax, and highlighted the growing international support behind it. The tax could raise as much $700 billion from a 0.05 per cent levy on all trades in the $4 trillion a day forex market. Global momentum continues to build despite the current government’s international opposition; there now exists a unique opportunity for Ed to lead British efforts worldwide for the adoption of the tax.

Recent weeks have seen a flurry of activity. Though differences exist within the European Union, France and Germany have been pushing hard for a FTT, with German Chancellor Angela Merkel declaring a few weeks ago in her national parliament:

“…we are going to try to persuade as many countries as possible.”

Her counterpart, Nicolas Sarkozy, has been equally vocal:

“Finance has globalised, so why should we not ask finance to participate in stabilising the world by taking a tax on each financial transaction?”

The French president has said if progress is not made on the idea, he will make it a key part of the agenda when they chair the G20 group of large economies. Spain and Portugal have also affirmed their support, at the UN summit last week on the Millennium Development Goals.

Earlier in the year the European Parliament voted overwhelmingly in favour of the tax, and the European Commission, the EU’s executive arm, is preparing a paper at the request of Europe’s finance ministers on the possible workings of the tax. Belgium has suggested that if no agreement can be reached at the EU level, the eurozone should look to take it forward separately.

As a passionate advocate of the tax, Ed should seize this momentum and lead the British charge globally. There are three principal ways he could do this.

1. Start arranging meetings and conversations with European leaders, particularly key proponents of financial transaction taxes. Not only will this be a great way to introduce himself to policy-makers throughout the continent, but it will add pressure on the government to re-think and engage more constructively with the proposal.

It will also demonstrate that the world’s leading financial centre is not averse to the idea, and that political support does exist.

2. Lead a political ground offensive for the tax. There already exists a major grassroots movement, which has cleverly clothed the idea as the ‘Robin Hood’ tax. This campaign is being led with celebrity endorsements and propelled through social networks, TV adverts and collaborative online forums. To date it has over 200,000 members.

Ed should meet with these campaign leaders to discuss how we can build on their efforts and what he and the Labour party can do to take it to the next level. As a party, we should also launch our own campaign. Ed has paid tribute to his defeated brother’s ‘Movement for Change’, a grassroots initiative mobilising and training local leaders. He has pledged to mainstream this within the Labour party. This is an ideal cause for it.

3. Provide clarity on any proposal for a financial transaction tax. One of the weaknesses of the campaign is that the idea can be found lacking in detail and definition. There are advocates who argue solely for a levy on currency transactions, and others for one on all financial and trading movements.

Proponents, including world leaders, have been guilty of re-defining its purpose for convenience; i.e. the tax will recoup the bailout of the financial world by taxpayers, protect taxpayers from future bailouts, help meet Millennium Development Goals, or be used for climate adaptation and mitigation in the developing world.

Understandably, this helps win support and the process of negotiations. But if we are to achieve any final resolution, then advocates have to be clearer in their intentions and mechanisms. Ed should be flexible, but have a strong idea on what type of FTT he wants and how it should be implemented.

The case for a financial transaction tax is overwhelming. It embodies every principle the left believes in: fairness, justice, and reciprocity. The time has now come for the new generation in the Labour party to take this to the next level.

35 Responses to “How Ed Miliband can become the Tobin Tax’s greatest leader”

  1. Peter Ptashko

    RT @leftfootfwd: How @Ed_Miliband can become the Tobin Tax’s greatest leader: //bit.ly/b09blw

  2. Better Banking

    RT @leftfootfwd: How @Ed_Miliband can become the Tobin Tax’s greatest leader: //bit.ly/b09blw

  3. Kieron Merrett

    RT @leftfootfwd: How @Ed_Miliband can become the Tobin Tax’s greatest leader: //bit.ly/b09blw

  4. Sector29

    Really good idea.
    RT @leftfootfwd: How Ed Miliband can become the Tobin Tax’s greatest leader //bit.ly/b09blw

  5. Scot Walker

    RT @leftfootfwd: How @Ed_Miliband can become the Tobin Tax’s greatest leader: //bit.ly/b09blw

  6. Carl

    Would it not be a risk for Ed, at his early stage, to try and define the tax (re proposal 3); if he gets it wrong it could be poison? What are some of the “bare bones” of its definition that could palatable Europe-wide?

  7. Red Ed

    Surely the idea we must pursue is that a Tobin tax will allow us to properly form a global government which serves the needs of the people rather than just the wealthy.

  8. Guido Fawkes

    “The tax could raise as much $700 billion from a 0.05 per cent levy on all trades in the $4 trillion a day forex market.”

    Some years ago research was done which suggested that th etotal profits made by hedge funds and investment from FX trading was some $10 billion. These profits are taxed in the normal way.

    You can’t get $700 billion in taxes from a business that makes $10 billion. This is a fallacy bordering on stupidty. Boosters of Tobin tax confuse turnover with profits. I suspect many do that knowingly.

  9. Guido Fawkes

    Forgive typos above – not on my usual keyboard.

  10. The Magic Pen

    How Ed Miliband can become the Tobin Tax's greatest leader | Left …: A financial transaction tax, more commonly … //bit.ly/c0Q292

  11. POC

    RT @leftfootfwd: How Ed Miliband can become the Tobin Tax’s greatest leader //bit.ly/c0Q292

  12. Huw Irranca-Davies

    Robin Hood and the Tobin Tax – an idea for the times … //tinyurl.com/28wcta4 /via @sowadally

  13. rayhan haque

    Hi

    Carl-it doesn’t have to be a fully detailed position paper, just some more flesh on the bones. There’s a risk that without more clarity the idea could lose momentum and traction. It’s up to policy-makers what they feel they can secure, but personally I believe a multi-purpose FTT would command broad international support, i/e emergency funds for future bank bailout’s, extra money for third world debt relief, and developing world climate adaptation (on the last, the west at the Copenhagen conference agreed to provide up to $100bn by 2020-we haven’t yet figured out how we are going to do this in an ‘age of austerity’)

    Red Ed- Totally agree, but for the above reasons some funds may have to be earmarked as a contingency for the financial world.

    Guido – According to the Bank for International Settlements, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, as of April 2010 a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007.

    //www.bis.org/publ/rpfxf07t.pdf

    You must remember this is not a tax on profits, but on the level of transactions and activity. Besides, there is a very big moral hazard in the forex market-a lot of the short-term speculative trading is socially unproductive, creates no real wealth, jobs, or investment, and adds to financial instability. This is a highly desirable tax.

  14. Shamik Das

    How @Ed_Miliband can become the Tobin Tax’s greatest leader: //bit.ly/b09blw by @rayhanhaque on @leftfootfwd

  15. Aaron Peters

    “Some years ago research was done which suggested that the total profits made by hedge funds and investment from FX trading was some $10 billion”.

    Guido you are a serious political commentator and that is simply grossly inaccurate.

    Most serious political economists put the size of the daily forex exchange market at being something like at least 50 times larger than the real market for trade in goods and services. Its huge and in these difficult times it is still growing (up some 20% since 2007).

    Why should the latter (global trade in commodities) be taxed in the form of trade levys while the former stays foot loose and fancy free?

    This is the most unproductive uses of surplus capital one could possibly devise in a market economy and Rayhan is utterly correct re. the issues of moral hazard here.

  16. william

    If you want to win a general election, inventing new taxes( paid of course by other people)will not wash with southerners who overwhelmingly rejected their experience of our failed tax and spend policy under Brown.It was Labour who overtaxed the poor:tax is not an area where we should go.Come the next election, and the inevitable strong economic recovery,we must promise to keep the tax burden as it then is as unchanged for a full parliament, with no new taxes, or else face the electoral consequences.Do you fancy canvassing on the doorstep with a Tobin tax as the issue of the day?

  17. steve

    RT @leftfootfwd: How @Ed_Miliband can become the Tobin Tax’s greatest leader: //bit.ly/b09blw

  18. Guido Fawkes

    If I buy $1m and sell it back later I may have made only $500 and turned over $2m. The mesmerising nominal figures for turnover are being confused with profits.

    The high turnover means there is a lot of liquidity which supports the underlying trade in goods and services.

  19. Rachel Hardy

    How Ed Miliband can become the Tobin Tax’s greatest leader | Left Foot Forward //goo.gl/RRfZ Green Party already support ROBIN H TAX

  20. Mr. Sensible

    Fully agree with this.

    It is high time the banks started properly paying for the damage they have caused the economy, rather than the current very small bank levy.

  21. Red Ed

    why try and protect the financial markets? global currency collapse can soon be followed by the return of the means of production to the hands of the workers. why perpetuate the system that protects the monied elite?

  22. IdeasFestivalBristol

    Should Ed Milliband take up the Tobin (Robin Hood) tax as a key issue? //is.gd/fJFNp We debate the tax 21October //is.gd/fkRkr

  23. Mark Stevo

    Most speculative FX trades have a very thin Marin. If you take each trade at 0.05% then those trades stop becoming profitable and volumes fall. As Guido says, you’ll not raise anything close to £700bn.

  24. Mark Stevo

    Oh FFS, iPhone predicative text is a pain.

  25. Robin Hood

    RT @FestivalofIdeas: Should Ed Milliband take up the Tobin (Robin Hood) tax as a key issue? //is.gd/fJFNp We debate the tax 21Octob …

  26. jamie pritchard

    RT @FestivalofIdeas: Should Ed Milliband take up the Tobin (Robin Hood) tax as a key issue? //is.gd/fJFNp We debate the tax 21Octob …

  27. Ruth Gouldbourne

    RT @FestivalofIdeas: Should Ed Milliband take up the Tobin (Robin Hood) tax as a key issue? //is.gd/fJFNp We debate the tax 21Octob …

  28. glynis powell

    RT @FestivalofIdeas: shld Ed Milliband take Tobin (Robin Hood) tax as key issue? //is.gd/fJFNp We debate tax 21Oct //is.gd/fkRkr

  29. Hector

    Global FTT is pretty good idea and hard to argue against, but a geographically limited one would be a mistake. 97% of all financial transactions in EU happen in Frankfurt and London, vast majority of which are in the latter. However, only a proportion of them originate from EU companies/countries. Since such transactions are virtual, do not involve any actual share, commodity etc they can occur any where. So it makes absolutely no sense from a UK perspective to introduce a tax which will undoubtedly drive business away from London, perhaps permanently. Sweden experimented with an FTT in early 90s and exactly this happened to them, as a consequence they are now strongly against such a tax only being levied at a local/regional level. They are not alone, Trichet – head of ECB – has said that a non-global FTT should be avoided so it only succeeds in driving transactions to markets that don’t levy the tax – and does not generate particularly great revenues are significantly alter behaviour as a result. There are also numerous technical problems with FTT – for example, how do you distribute revenue? Would London/UK get it all? If Royal Dutch Shell, for example, with staff across the EU, uses a derivative to hedge an interest rate risk on its group pension, where is the revenue from the FTT that it pays distributed? Is it split between UK and Netherlands since that is where Shell is jointly head quartered? Is it distributed across all the EU countries where it is has operations since it is a transaction linked to its group pension fund? Is it in London since that is where the transaction was cleared? Or is it in the country where the investment bank that undertook the transaction is headquatered? There are so many problems with an FTT, perhaps too many. DOn’t get your hopes up that this is going to happen…

  30. rayhan haque

    To clear up any confusion, it should be noted the $4 trillion figure refers to the daily trading volume in the worldwide forex (currency market), according to the Bank for International Settlements. The $700bn figure is derived from calculations conducted by the Austrian government of what a 0.05% tax on all financial transaction dealings (stocks, shares, complex derivatives, currencies etc) could raise. Obviously the level of total financial trading will be substantially higher than $4 trillion a day. A FTT on all trades is one option being pursued by advocates, notably the Robin Hood campaign.

    If you were to have a more targeted FTT, like a Currency Transaction Tax (CTT), the revenues would be smaller, but still substantial. A CTT implemented universally at the 0.005% level would raise US$ 24.26bn, while a 0.01% CTT would yield something in the order of US$ 47bn.

    //visar.csustan.edu/aaba/Spratt2006.pdf

  31. Rene Bach

    RT @FestivalofIdeas: Should Ed Milliband take up the Tobin (Robin Hood) tax as a key issue? //is.gd/fJFNp We debate the tax 21Octob …

  32. Bolotics

    A Tobin tax or levy on financial transactions made by banks/funds would raise much needed capital and reduce the reliance on soveriegn debt has the main way to bail out failed banks/bankers.

    The Governor of the Bank of England told the TUC this crisis was not the fault of the trade unions and a Government of any political colour should deal with the city on a London/UK and Globla scale, G20 agreement is required if this tax is/was to work.

    Now rather like any new drug new financial instruments should tested for their ability to work effectively and the days of city folk creating instruments and regulators chasing the curve should cease. Treat financial instruments like untested drugs before they are allowed on to the market place and maybe then we can stop the reckless practises of the past.

    Bolotics…

  33. Stewart Owadally

    @ReeceEmmitt Or a 0.05% Tobin Tax: $700bn //bit.ly/beXW93

  34. Reinaut

    Surely the tax should be used to finance global public goods like poverty reduction. But to convince (or force) the financial world to implement something like this will be extremely hard, as is note here before. Maybe a currency transaction tax might have more of a chance: //bit.ly/aTUB8g

  35. Nine economists tell George Osborne how to fix the country | Left Foot Forward

    […] a personal adviser to George Osborne on development issues, calls on Osborne to agree to implement a financial transaction tax in Europe, and to use his leverage to encourage the Americans to come on board as well: “I am […]

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