The media is already occupied with pre-Budget clamour: what will Osborne's rabbit out the hat trick be this time round? But pasty taxes, bedroom taxes, even a mansion tax (which will raise around £2bn) can only be described as fiscal tinkering. What's needed is a bolder approach.
Simon Chouffot is spokesperson for the Robin Hood Tax campaign
The media is already occupied with pre-Budget clamour: what will Osborne’s rabbit out the hat trick be this time round? Will the pasty tax have a sequel that’s even tougher to swallow?
We already know what not to expect – and that’s a dramatic change in tack. The government has repeatedly stated that austerity is here to stay – there is no plan B.
Pasty taxes, bedroom taxes, even a mansion tax (which will raise around £2bn) can only be described as fiscal tinkering.
As a report recently published by the Institute for Public Policy Research suggests, an all-together bolder approach is needed.
With the economy wallowing in the doldrums, if either the government or opposition are serious about eliminating the fiscal deficit whilst maintaining current levels of spending on public services, new taxes are a must.
As the report says:
“In the absence of political room to increase major revenue-raising taxes, such as income tax and VAT, and given the limited revenues that can be raised by taxes such as the proposed mansion tax, the government should examine seriously the feasibility of a land value tax and the option of following the lead of the 11 EU countries that are moving forward to implement a general financial transaction tax by extending the UK’s current tax on share transactions to cover bonds and derivatives as well.”
The report shows how a wide-ranging Financial Transaction Tax covering the trading of various financial assets – mirroring the measures being adopted by European countries including Germany and France – could raise as much as £20bn a year in the UK.
The mechanics of the tax are simple – it would involve rolling out the UK’s present stamp duty on shares to bonds and derivatives, and could be implemented inside a year.
The report demolishes old accusations levelled against the FTT, citing as its top trump the fact that 13 of the world’s 15 leading financial centres have implemented FTTs.
But one of the most eye-catching parts of the report is what could be achieved with the revenue. The IPPR suggests a significant proportion of its proceeds could finance the British Investment Bank.
Whilst we would argue that measures to tackle poverty at home and abroad and help poor countries cope with climate change should be at the front of the queue for FTT receipts, there is real logic in putting a significant chunk of the revenue towards an investment bank.
An institution that would bypass the credit bottleneck of Britain’s biggest banks, lend to cash-starved SMEs and spend billions on infrastructure to get the economy moving could help lift the economic pain that is being inflicted on millions of Britons.
There’s an eloquence to the idea that the banking sector – which not only derailed our economy, but is also responsible for blocking recovery by hoovering up Quantitative Easing and Funding for Lending money – help finance the British Investment Bank. It would end banks’ cannibalisation of our economy and get them contributing to our greater interest.
The report rightly places the Financial Transaction Tax alongside other measures that are needed to promote growth – boosting exports, moving beyond an over-reliance on the City and revitalising the regions.
It could make an interesting read for Eds Miliband and Balls – taken together it offers a picture of a more responsible form of capitalism.
But George Osborne should pay attention as well. The banking sector paid just £1.3 billion in corporation tax in 2011/12 – less than one-third the amount paid by the manufacturing sector. As the influential Mirrlees Review (IFS 2010) points out: financial services are bewilderingly exempt from VAT; it’s why the International Monetary Fund has called the banking sector under-taxed.
The financial sector caused the largest crisis of a generation. No amount of granny, spare bedroom, pasty or mansion taxes will put that right. It’s time to ask the financial sector to pay their fair share.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.