We are proud that last week Torfaen became the first council in the UK to pass a motion calling on the government to implement a Financial Transaction Tax (FTT). It heralds the start of a nationwide initiative by the Robin Hood Tax campaign to get as many local councils signed up as possible.
Cllr Bob Wellington is leader of the Labour Group on Torfaen Council
We are proud that last week Torfaen became the first council in the UK to pass a motion calling on the government to implement a Financial Transaction Tax (FTT).
We were swiftly followed by the London Borough of Lewisham; and it heralds the start of a nationwide initiative by the Robin Hood Tax campaign to get as many local councils signed up as possible.
Some may ask what a tax on casino bankers has to do with a council in Wales? I would invite them to visit Torfaen to see for themselves the crushing effect the banker’s economic crisis has had on our parts of our local community.
The FTT would help to reduce some of the destabilising, risky behaviour that led to the 2008 crash. But, as our Council motion sets out (see p.263), it could also raise big sums – as much as £20bn per year.
The rate is set so low – between 0.01% and 0.1% – so it targets those City institutions engaged in short-term high rolling speculative activity, and not ordinary businesses. A
All sorts of negative stories are concocted by the financial sector with reference to the FTT – but studies continue to show that FTTs would be good for both pensions and growth.
Imagine what this money could do: it could be game changing. One day of revenue would provide for three million additional hours of home care for the most vulnerable people in our society and five days of revenue would pay for 10,000 newly qualified teachers to replace all the teaching jobs lost in 2011.
We in local government are living through tough times – and, by Local Government Association estimates, things are getting tougher.
A local government funding gap of £16.5bn is projected by the end of the decade. One week of FTT revenue could increase the main source of annual Welsh Council funding by 10%.
I would also say to Scottish colleagues that their main source of annual funding could also be increased by 10% through two weeks worth of revenues.
If the idea sounds fanciful, let’s look to Europe where governments of the left and right – including France, Germany, Italy and Spain (the biggest economies) – are pushing ahead with a broad based FTT on stocks, bonds and derivatives set to raise as much as £30bn a year.
The UK, with its huge financial sector, has even more reason to follow suit.
The FTT would help communities up and down the country, and as polls show, the tax is popular with voters. I’ll be encouraging all councils to follow Torfaen’s lead in passing this motion, and to put pressure on our politicians in Westminster to implement this much needed tax.
The crisis may have started on the trading floors of London, but it is local authorities and, more importantly, the people we serve who continue to feel its effects – that is why we must ensure our voices are heard in this debate.
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7 Responses to “Torfaen becomes first council to pass Financial Transaction Tax motion”
LB
Brilliant Idea.
A tax every transaction you make at an ATM. 1% is only a very small tax.
Lots of money gets transacted through ATMs.
Very often its the proceeds of crimes.
By implementing this tax we safeguard local services.
What’s even better its the banks that pay the government the money.
Can’t spot the problem.
Anthony Masters
Firstly, I notice Cllr Wellington describes the 2008 financial crash as “the banker’s economic crisis”. This statement, which is commonly heard in various guises, places the author at odds with the Labour government at the time, which determined the crisis was a matter of systemic failure, rather than the failure of individual bankers.
“The FTT would help to reduce some of the destabilising, risky behaviour that led to the 2008 crash.” The 2008 crash has clearly led to wild political speculation. If you place a tax on a transaction, then that transaction will normally only take place if the expected gain is greater than the tax itself. Thus, it is likely that smaller, stable transactions would simply not occur under that tax system; whilst larger, riskier transactions would still happen. Moreover, transaction taxes tend to accumulate over the financial year. According to the Economist (http://www.economist.com/news/leaders/21572205-plans-transactions-tax-ought-be-dropped-bin-it): “Even the headline rates are less innocuous than they look. A 0.1% charge on repo transactions, a way for banks to finance themselves overnight, turns into a 25% charge over the course of a working year.”
Next, the author states: “[I]t could also raise big sums – as much as £20bn per year.” Taxes often appear more attractive if you highlight the upper range of estimates. Even the cited paper ‘The Economic Consequences of the EU Proposal for a Financial Transaction Tax’ by Professor Persaud places the possible revenue at £8.4bn. Also, it is never noted what effect an FTT would have on other tax revenues, due to the drop in transactions. According to the IFS (http://www.ifs.org.uk/wps/wp0411.pdf), “stamp duty is shown to depress share prices, particularly for firms whose shares are frequently traded. This may increase the cost of capital faced by firms, which in turn could be negative.” Thus, an FTT could lower overall tax revenue, whilst nominally raising a few billion pounds.
Lastly, Cllr Wellington notices: “A local government funding gap of £16.5bn is projected by the end of the decade.” However, a number of groups are campaigning for this FTT on the basis that their preferred causes would be the primary recipients of the tax revenue. Local government would simply have to join the queue. Also, a funding gap suggests that local government is not a top funding priority of the national government, meaning that the LGA would have to drastically change the political status quo. Councils really should be demanding the ability to raise more taxes locally, rather than campaigning for a national FTT.
Mike
Good piece.
On the local government getting the cash point, it seems reasonable after the current government has made so much of localist rhetoric, and with Hilary Benn attempting to show how he would reinvigorate councils across the country if Labour get into office, for a council to be appealing for a chunk of a tax that 11 European countries are going ahead and doing. I’m sure he and other councils continue to make the case for devolving money from Whitehall, but that doesn’t mean they can’t ask for other areas of funding, surely. I would hope my council leader would be doing similar.
I take Anthony’s issue about raising the cost of borrowing etc for firms, but what is the reality today? Bank lending hit the floor after the crash. Low interest rates haven’t helped much. This money isn’t reaching the real economy anyway. Also, how much are these institutions actually paying in tax. Not much in corporation tax, certainly. £20bn may be a high estimate, but if its even a significant percentage of that this still seems a positive tax given it would help eliminate a whole bunch of toxic and unfathomable derivatives.
The risk is that the financial system might be hit a bit. But councils and public services are already being hit. Seems reasonable to prioritise helping the latter over the former.
Newsbot9
Keep protecting high frequency trading. Moreover, damping speculation has all sorts of positive benefits which you fail to mention.
Newsbot9
Of course you’re after the poor again. And no, criminals don’t use traceable ATM’s.
Blind as ever.