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.
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20 Responses to “The financial sector caused the largest crisis of a generation. No amount of spare bedroom taxes will put that right”
Simon Thorpe
An FTT would be fantastic for the UK. According to my calculations, financial transactions in the UK in 2011 were something like £1.76 quadrillion – that’s more than 3000 the total revenue generated by ALL the existing taxes. It follows that an FTT of 0.03% would allow all the other taxes to be scrapped. Imagine the boost to the real economy of having VAT at 0%, Income Tax at 0%, Corporation Tax at 0% and National Insurance Contributions at 0%. And all that paid for with a minuscule tax that ordinary people wouldn’t even notice. Importantly, it would apply to all actors equally, meaning that there would be none of the inbuilt advantages that multinationals like Google, Starbucks and Amazon enjoy. And it would be virtually impossible to avoid.
One other neat feature is that the rate of the FTT can be continuously modified to maintain the required revenue stream. If transactions dropped by 50% because the High Frequency Traders reduced their activity, you would have to increase the rate from 0.03% to 0.06%. So what?
Such minor fluctuations are far less significant that the huge variations in the Foreign Exchange rates which are themselves directly the consequence of the ridiculous amounts of foreign exchange going though the City.
Makes good sense to me.
Celia Lawton-Livingstone
The don’t have the financial intelligence to have a Plan B. Most of them get their speeches written for them and don’t have 2 braincells to rub together after all.
Corrupt_B'stard
Time for a real radical change. Time to introduce the Unconditional Basic Income Guarantee. Luckily the EU initiative for a Basic Income is launched this week. http://basicincome2013.eu/
mike cobley
I dont want them to pay their fair share – I want them to pay until the pain makes them beg for mercy. I want them to be regulated with iron chains of legislation that will protect future generations from their predatorial, imperial greed.
Newsbot9
Yes, you keep claiming that costs 150 billion. More crooked math from a fraud.