The financial transactions tax has the potential to raise £20 billion a year for the UK

The Financial Transactions Tax is soon to be top of the political agenda once again in Europe.

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Teresa Pearce is MP for Erith and Thamesmead and a member of the Treasury Committee

Though the financial transactions tax (FTT) has long been on the political radar, it may be about to shoot up the news agenda once again.

hollande cameronEuropean ministers are set to meet on 22 June to debate a raft of issues, including, it seems likely, the FTT.

With a vocal advocate in the shape of President Hollande having recently come into office, FTT remains at the forefront of the minds of European leaders.

Our own prime minister’s vehement opposition to the very principle of the FTT (with his speaking occasionally of a global deal but doing little to drive forward any such initiative) is but one issue where he is out of step with much of the continent.

Whilst parliamentarians (including myself) in this country have expressed approval for the FTT through various means, the wider Labour Party will debate the issue in some depth in the coming days.

Amongst many interesting documents sent to the party’s National Policy Forum which meets at the end of this week is a submission from the Robin Hood Tax coalition which advocates Labour adopting the FTT as party policy.

The FTT – which rolls out the present £3bn raised through the stamp duty on share transactions to further taxes on bonds and derivatives – has the potential to raise £20bn per annum in the UK: over six times the size of the Green Investment Bank, ten times the amount the government’s proposed pension fund investment platform will raise, and twelve times the revenue often linked to that flagship Lib Dem policy (at least before the last election), the mansion tax.

Labour’s five point plan for growth has offered a much needed positive counterbalance to the coalition’s negative message of austerity. With the government’s slashing of public spending leading to economic stagnation, Ed Balls, Rachel Reeves and others are to be congratulated for their sterling work in questioning the downward spiral of Osborne’s economics.

The green shoots of recovery set in motion by the last Labour budget of March 2010 have been choked by the coalition’s anti-growth approach, and Labour has held them to account. But there is more work to be done.

Though it accomplished historic achievements in several areas, the last government could, it has been argued, have done more to clamp down on financial speculation. Labour must learn the lessons here.

 


See also:

As Europe looks set to back a Robin Hood Tax, Osborne remains on the side of the 1% 16 May 2012

Will President Hollande be able to turn France – and the Euro Area – around? 8 May 2012

Robin Hood Tax gains momentum – on the continent 3 Jan 2012


 

The FTT is a potential double-win for our economy in that it curbs unwanted financial speculation whilst creating a revenue stream that can be invested in more worthwhile pursuits. Tackling climate change and meeting our international development commitments are two areas that would benefit from such additional revenues. But the FTT can deliver economic growth too.

When the European Commission published its proposals for an EU-wide FTT it was met with howls of derision from the right-wing press. Initial modeling did indeed indicate that such a tax could have a negative impact on growth of up to 0.5%.

Yet, it was later shown, the EC hadn’t run the numbers as best they might. Essentially, as Avinash Persaud – former Head of Currency and Commodity Research at J.P. Morgan – has shown, they discounted the positive effects on jobs and growth using the receipt of the tax could have, and simply assumed that any FTT would equate to ‘digging a hole in the ground and put the revenues [from such a tax] there.’

Whilst the current government may run the economy on such principles, Labour has always held a more positive and dynamic view of the power of government to shape our economy.

The state does not stand as a merely passive instrument which must get out of the way of market forces, but can be a dynamic economic player in its own right. It can, and should, act to curb excessive speculation. It can, and should, invest the capital raised by taxing such practices for the good of the majority. As Persaud shows, the effect of a well-designed FTT would be to make a positive, not negative, impact on growth.

This could, it is true, take many forms. A ‘British Investment’ (or ‘National Infrastructure’) Bank has been hypothesised by various commentators over the past few months. Either through direct investment or facilitating that of the private sector, there is much a pro-active government could do with £20bn.

Similarly, there are the provisions of the five point plan: a jobs guarantee, bringing forward long term infrastructure projects, lowering the rate of VAT, cutting it to 5% on home improvements and a one year national insurance break for every small firm which takes on extra workers. An FTT would help build upon such pledges, possibly expand them, and could also help fund other measures to jumpstart our economy.

We are three years away from the next election, and Jon Cruddas’s formal policy review work has only just started. He, and the National Policy Forum meeting this weekend, have much to consider. The FTT is worth serious thought during such discussions.

 


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49 Responses to “The financial transactions tax has the potential to raise £20 billion a year for the UK”

  1. Fiona McMahon

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  2. wyrd sis

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  3. Pulp Ark

    The financial transactions tax has the potential to raise £20… //t.co/NVVYdy9G #SustainableEconomy #DavidCameron #muslim #tcot #sioa

  4. WhileyAndrew

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  5. London Green Party

    The financial transactions tax could raise £20bn a year @leftfootforward <& give us a more stable economy //t.co/QqvGWKYW

  6. Alun Wyn Griffiths

    @JonathanPlaid RT @leftfootfwd The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/sLBG1cAx

  7. Political Planet

    The financial transactions tax has the potential to raise £20 billion a year for the UK: The Financial Transacti… //t.co/h4o5qFDY

  8. nosapience

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  9. leftlinks

    Left Foot Forward – The financial transactions tax has the potential to raise £20 billion a year… //t.co/wq8v8DFx

  10. Yrotitna

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  11. BevR

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  12. Michael

    The financial transactions tax has the potential to raise £20 billion a year for the UK – //t.co/Gt1OC2bP

  13. Tom Hully

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  14. Ratna Lachman

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  15. Brian

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  16. Richard Carr

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  17. Pauline

    The financial transactions tax has the potential to raise £20 billion a year for the UK – //t.co/Gt1OC2bP

  18. Dave Watson

    Strong case made for financial transactions tax. Potential to raise £20 billion a year for the UK //t.co/UUXVv4K6

  19. Tom Potter

    The financial transactions tax could raise £20bn a year @leftfootforward <& give us a more stable economy //t.co/QqvGWKYW

  20. Belinda Scott

    “@TheRightArticle: The financial transactions tax has the potential to raise £20 billion a year for the UK – //t.co/Cah3NLsu”Just do it

  21. Lord Blagger

    Yep. A fiver every time you use an ATM.

    Just what the country needs. More tax.

  22. Todd

    “@TheRightArticle: The financial transactions tax has the potential to raise £20 billion a year for the UK – //t.co/Cah3NLsu”Just do it

  23. Hilda Palmer

    The financial transactions tax could raise £20bn a year for the UK, writes @tpearce003: //t.co/eJbmKGpT

  24. Stamp out Poverty

    MP @tpearce003 on FTT, Labour party + growth. See @leftfootfwd article //t.co/6ZmXLKhp ahead of robin hood submission to NPF this w/e.

  25. BevR

    RT @leftfootfwd: The financial transactions tax has the potential to raise £20 billion a year for the UK //t.co/Jcc7ujkn

  26. Alex Braithwaite

    RT @leftfootfwd: The financial transactions tax has the potential to raise £20 billion a year for the UK //t.co/qlZhHN8h

  27. Anonymous

    That’s right, you can’t pay your way like the 99%.
    You don’t need to use ATM’s of course, so your suggestion…

  28. Richard Carr

    MP @tpearce003 on FTT, Labour party + growth. See @leftfootfwd article //t.co/6ZmXLKhp ahead of robin hood submission to NPF this w/e.

  29. Anonymous

    Bye bye Europe.

    FTT taxes the entire transaction infrastructure that all of us use. Individuals will pay all of this tax. For investors, investment yields will drop. Businesses use the investing infrastructure, meaning the cost of goods and services rise. IMF’s FTT Final Report For The G-20, June 2010, “Its real burden may fall largely on final consumers rather than, as often seems to be supposed, earnings in the financial sector.”

    UK’s European Scrutiny Committee citing the EU Commission’s FTT Impact Assessment (Even Before the Damaging Relocation Effects): “a 3.43% fall in EU GDP equates to a fall in economic output worth €421 (£362) billion and a 0.34% fall in employment equates to a loss of 812,000 jobs.”

    UK’s Economic Sub-Committee of the House of Lords, “The FTT is likely to induce a loss in GDP between five and 20 times larger than the revenues raised from the tax.”

    Sweden’s short-lived FTT raised 3 percent of projected revenues, not enough to cover the cost of collecting the tax.

  30. Selohesra

    Most people accept need to rebalance economy so there is less reliance on the City. I would suggest growing the other areas but the FTT achieves the aim by destroying the financial services industry or at least sending it off to other more friendly jurisdictions

  31. Robin Hood

    New blog from Teresa Pearce MP: 'The financial transactions tax has potential to raise £20 billion a year for the UK' //t.co/OH0rwXeW

  32. Chris Kirby

    New blog from Teresa Pearce MP: 'The financial transactions tax has potential to raise £20 billion a year for the UK' //t.co/OH0rwXeW

  33. Sussex LRC

    Case well put by @tpearce003 in support of a financial transactions tax to curb financial speculation & raise revenue //t.co/TJfLNBtS

  34. JOHN ROY TAYLOR

    RT @leftfootfwd: The financial transactions tax has the potential to raise £20 billion a year for the UK //t.co/gLuBU997

  35. Anonymous

    Most people. yes, which is why your crusade to make the City the be-all and end-all is so interesting.

  36. Anonymous

    Sweden made the mistake of going it alone, with a poorly structured tax and no ability to ensure that any business inside the zone paid (and yes they can do that, unless VAT is illegal).

    This has none of those flaws. Moreover, we’re seeing far MORE damage being done by the financial sector than that today.

  37. Mr. Sensible

    Entirely agree with this article. Labour should adopt this as a matter of urgency, and work towards international agreement.

  38. Selohesra

    You appear to have misunderstood as usual so just to be clear – I am in favour of rebalancing by bring up the other areas rather than bringing down the City

  39. Localis

    Proposals for a National Infrastructure Bank, as per Localis' infrastructure report, highlighted by Teresa Pearce MP: //t.co/YZ1hnUT2

  40. Anonymous

    Which is completely unrealistic, you can’t expect other industries to recover while the needed investment capital is in a stranglehold.

  41. Mary

    The financial transactions tax could raise £20bn a year //t.co/eNbOkfWv

  42. Roger McKenzie

    “@stirchley: The financial transactions tax could raise £20bn a year //t.co/phcCnsbx”

  43. Saggydaddy

    “@stirchley: The financial transactions tax could raise £20bn a year //t.co/phcCnsbx”

  44. Jennifer Hynes

    “@stirchley: The financial transactions tax could raise £20bn a year //t.co/phcCnsbx”

  45. John Meldrum

    “@stirchley: The financial transactions tax could raise £20bn a year //t.co/phcCnsbx”

  46. BevR

    RT @leftfootfwd: The financial transactions tax has the potential to raise £20 billion a year for the UK //t.co/Jcc7ujkn

  47. It is time to debate a new economy | Left Foot Forward

    […] The financial transactions tax has the potential to raise £20 billion a year for the UK 14 Jun […]

  48. Victor Anderson

    What would the money be spent on? This week the Rio Earth Summit is on – but without legally binding commitments being considered, the main way agreements there can be implemented is through finance. But there is no new money on the table at present. FTT – along with getting rid of fossil fuel subsidies – could provide some of the money needed for investment in ecosystems so we can maintain water and food supplies.

  49. Osborne's thrown a javelin through his own foot by failing to make FTT a reality | Left Foot Forward

    […] See also: • The financial transactions tax has the potential to raise £20 billion a year for the UK 14 Jun […]

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