A Holy Trinity of Bill Gates, George Soros and the Archbishop of Canterbury all now advocate such a proposal. On top of that, Jose Manuel Barroso, President of the European Commission, is now actively pursuing plans to introduce the Tobin Tax across the EU – and soon.
And do not think that the UK can automatically veto any such plans. For it is quite possible that a Tobin Tax could be introduced under Qualified Majority Voting (QMV) – with devastating consequences for the City of London.
First, though, we should be clear. The Tobin Tax is a bad tax. And now, when it is essential that the financial markets can work as smoothly as possible to support growth, is an extremely bad time at which to introduce this.
And yet the Chancellor has failed to oppose the tax directly. His cunning plan is to say that he is in favour of a Tobin Tax but only if it can be introduced across the world. Similarly, the Prime Minister has acknowledged that here is “widespread support” for a Tobin Tax without taking the opportunity to dismiss outright the chance of it ever being introduced.
Such complacency must be challenged. The Centre for Policy Studies is preparing a detailed paper which will reveal all the disastrous consequences of such a tax, but it is already clear (not least from the EU’s own analysis) that a Tobin Tax would devastate financial services in this country.
For example, the EU has itself admitted it would wipe out over 1.76 per cent of EU GDP (over 200bn euros); that 70 per cent of the tax would come from the UK; that business would quickly emigrate to countries which had no such tax; that the 55bn euros raised would eventually fall on end-users of the financial services (that is, you and me). And while a level of 0.1 per cent on all financial transactions has been suggested, who could really believe that it would stay at that level for long? Just as there is nothing so permanent as a temporary tax, so too is there no tax so low that it cannot be raised.
But while the consequences for the UK are so damaging, consider the attractions of the Tobin Tax from the point of view of the EU. First of all, under current proposals, it hands the Commission the Holy Grail.
For the first time, the Commission will enjoy its own source of funds – 55bn euros a year, every year, in perpetuity.
At the moment, all the Commission’s income comes from the member states whereas the Tobin Tax, as currently suggested by Barroso, would be the first tax that would flow directly to its coffers. And, on top of that, because it is seen as a way of “bashing the bankers”, it is an extremely popular tax (not least because the political classes have failed to argue against it openly).
Which other tax, raising 55bn euros, wins the support of 65 per cent of the electorate? It is no surprise then that Barroso, Angela Merkel, Wolfgang Schauble (Germany’s finance minister) and Nicolas Sarkozy – none of whom have shown much love for the City of London – are all said to be pushing hard for this to be adopted quickly. The EU has never knowingly let a crisis go to waste.
Could the EU resist the temptation of trying to bring this in now, not least as it would strengthen its hand after the Greek catastrophe?
All is not lost. The UK can stop this, and stop it now. But we should abandon cunning plans and the supine attitude exemplified by the failure of the City of London authorities to deal with tents at St Paul’s.
Rather, we must show the courage and conviction to state that this is a bad tax – and that if the subject (and all variations on it) is raised again by the EU, then the UK will unilaterally veto all forthcoming attempts to amend the EU treaties. Now is the time to bin the Tobin Tax.