Despite cold feet over a European Financial Transactions Tax, Labour may well return to Robin Hood
There is a broad consensus in favour of a Financial Transactions Tax (FTT) in Europe. It unites the Greens, the Party of European Socialists, the right of centre governments in France and Germany (and many other countries), and now Commission President Barroso who is promoting a draft European Directive.
But as support has grown in the rest of Europe, British politicians left and right are growing less keen.
Before the 2010 General Election in Britain, all parties flirted with the idea: no one wanted to alienate an unknown portion of the electorate by actually rejecting it. Since then, the Conservatives have become more hostile, spurred on by hostility from the City of London. During the Labour leadership contest, all candidates backed the idea of a global tax, and that remains the party’s official position. Ed Miliband initially teased Prime Minister David Cameron over the prospect of an EU tax, suggesting that Labour needed only safety in numbers rather than a truly global deal.
The Government has now all but abandoned even the pretence of supporting a global version: they continue to support it publicly while blocking it privately, eg at the G20. There is open hostility to the draft directive. Nor is there any joy for Liberal Democrat supporters of the tax, as Cable and Clegg have abandoned their pro-FTT 2010 manifesto to adopt a united front with their coalition partners.
The Labour leadership is not much more positive. Although probably more genuinely supportive of a global tax (as floated by Prime Minister Gordon Brown in Government), they have become increasingly hostile to a European tax, leaving the party’s MEPs in a familiarly uncomfortable position between their colleagues in the European Parliament and the party leadership at home.
So why Labour’s cold feet?(1)
First, the tax has fallen foul of the toxicity of Europe. Every time someone suggests the tax should fund the EU budget, or help bail out the eurozone, its popular support suffers. The purpose of the Robin Hood Tax, or its German or Italian equivalents
Steuergegenarmut or
Zero Zero Cinque, was to combat poverty at home and abroad by defending public services, increasing overseas aid or tackling climate change. Labour should be showing the leadership it accuses the coalition of failing to demonstrate, and leading the campaign to get the tax back on track as a generator of revenue for global public goods.
Second, the debate about the tax has shifted from a ‘really neat idea’ to a formal proposal with economic impacts. Opposition to the tax from the finance sector has hardened as they realise it must be taken seriously, and stories are circulating that it will cost jobs, cut pensions and drive business overseas. Although each of these can be rebutted by supporters (sometimes too slowly), they worry politicians who want certainty in areas where both sides are, frankly, often speculating (apologies for the pun). Now the devil is in the detail. The Commission’s proposals are definitive but sometimes flawed.
Campaigners are debating with the Commission the fine detail of issues such as the residence principle and the extent of the transactions brought into the scope of the tax.
Lastly, the Labour Party has not yet come under much pressure from Robin Hood Tax campaigners, who have concentrated in the UK on the Government and on building a global coalition. Pragmatically, it was reasoned, a Labour Party totally committed to the tax might actually make Government support less likely.
But there are reasons why Labour in the UK might return to support for the Robin Hood Tax.
Since the EU’s draft directive made the FTT a likelihood rather than a campaigner’s dream, other arguments in its favour have grown in importance. Keynes and Tobin advocated earlier versions of the tax for reasons of market efficiency rather than revenue generation. Commentators such as John Plender in the Financial Times and Robert Peston on the BBC have drawn attention to the way an FTT could rebalance the finance sector by changing the relative profitability of high frequency, algorithm-driven trading on the one hand and long-term investment in industry and housing. This chimes with the approach to ‘predators’ and ‘producers’ set out in Ed Miliband’s speech to the 2011 Party Conference.
The very existence of a draft Directive, despite the toxicity factor, could also make it easier for Labour to ease its way back to support for the tax. As the debate becomes detailed and specific, challenges that currently make Labour’s leadership nervous will be rebutted with more vigour. The political dynamic in the US (which is where Labour really worries City jobs might go) is changing too, because of the EU’s position and the growing debate fostered by Occupy Wall Street. And if a eurozone tax is in place by the time of the next General Election in 2015 (as is the Commission’s plan) and the sky has not fallen on Paris or Frankfurt, Labour will find it much easier to support extending a successful tax.
And thirdly, Labour leaders’ more open concern about the tax will encourage campaigners to target them, especially if the Government remains so unremittingly hostile. The unions which affiliate to Labour are major supporters of the Robin Hood Tax campaign, as are development campaigners and environmental activists. At Party Conference this year, the tax secured more references in speeches than most campaigns. Labour is not lost to Robin Hood.
Owen Tudor is head of the European Union and International Relations Department at the Trades Union Congress (TUC)
1. What follows is based on private conversations with Shadow Ministers and some public statements such as Shadow Financial Secretary Chris Leslie’s comments in the Commons on 8 November on the EU budget and Shadow Europe Minister Emma Reynolds’ comments on a panel at the PES Convention on 25 November. Chris’ earlier Labour List article on 28 October, before the G20, was more positive about an FTT than his later comments recorded in Hansard thus: “We have to make concerted efforts to broker a deal where any FTT applies in any of the world's big financial centres, all of which by the way have much to gain from a new and reliable revenue stream that supports jobs, growth and the developing world. The Commission's proposal falls short, especially because of its intended destination for the revenue, but I think that the difference my right hon. Friend seeks is this: we felt that there was a real window of opportunity to steer the agenda on a financial transaction tax and to persuade other countries that it was something seriously worth considering, but our Chancellor is out there at the ECOFIN meeting today, resisting under all circumstances. Indeed, he wrote a private letter to bankers the other day in which he indicated that he was not in favour of it at all-even though that contradicts some of his statements in this place. He is wrong to block wider discussion among the G20 and beyond.” Recently ex-Clifford Chance lawyer Mark Rowley set out more forthright criticisms of the EU draft directive here.