As more than 75% of the general public argue that we're not "all in this together", Felicity Hannah looks at the case for the Robin Hood tax.
Do you believe that we’re not ‘all in this together’ and that banks should be made to pay more? The campaign calling for a Robin Hood tax certainly thinks so.
A coalition of campaigners from groups including charities, trade unions, celebrities and even world leaders are demanding a financial transaction tax be levied against the banks.
They claim it could generate hundreds of billions of pounds to be spent tackling poverty, protecting against climate change and supporting the UK’s struggling public sector.
Not only that, but campaigners say it would satisfy the general public, who feel that the bankers had the party, but they have been left with the bill.
In fact, a new survey conducted on behalf of the campaign found that more than three-quarters of the UK public don’t think that the Government has done enough to ensure we’re “all in this together”. The majority also feel that banks and the financial sector have not been asked to make a fair contribution.
David Hillman, a spokesman for the Robin Hood Tax campaign, said: “This is the clearest evidence yet that the public is tired of the Government’s failure to make banks pay their fair share to society.
“People are tired of seeing their schools and hospitals cut while a sector that relied on taxpayers’ money to survive gives lottery-sized bonuses to bankers whatever their performance.”
But how would a Robin Hood tax work and would it benefit you?
What is the Robin Hood tax?
The Robin Hood tax is a financial transaction tax, similar in many ways to the ‘Tobin tax’ once proposed by Nobel Laureate economist James Tobin.
Except, while he wanted to tax all currency conversions, the Robin Hood tax would be levied against transactions such as stocks, bonds, foreign currency and derivatives.
Campaigners are calling for a “tiny tax” of 0.05% on these transactions. It wouldn’t be levied against everyday consumer banking.
You can see a video explaining the amount and starring the inimitable Bill Nighy on the campaign’s website.
How much would it generate?
In the UK, the campaigners estimate a Robin Hood tax would raise £20 billion annually.
Globally, estimates vary but most campaigners claim it would raise hundreds of billions a year and potentially more than £200 billion a year. This is hardly small change.
How would it help me?
The idea is for the money raised to be split three ways in the UK. 50% would be spent fighting poverty in the UK, 25% would go on overseas aid and 25% would be earmarked for tackling climate change.
According to the campaigners, this UK spending could help shield you and your community from the affects of the cuts.
For example, £2 billion could offset the need for cuts to housing benefits; £680 million could reinstate the Educational Maintenance Allowance and £110,000 could save 350 libraries at risk of closure.
A study by the by the Institute for Public Policy Research suggests that the financial sector can afford an extra £20 billion in tax. At a time when the public sector is facing some of the most demanding cuts in its history, £20 billion could go a long way to ease the pain.
I’m a banker, it doesn’t benefit me!
Okay, if you’re reading this and you’re the head of a multinational investment bank then perhaps the headline doesn’t quite apply to you. This will cost you money. If it were implemented, it would inevitably squeeze your profits and likely your bonus.
[SPOTLIGHT]However, there’s also a chance that it could redeem your reputation. At present, the banking sector is one of the least trusted (although admittedly journalists are trusted even less according to an Ipsos MORI poll).
A Robin Hood tax could change all that. Entered into willingly, a financial transaction tax could put bankers at the heart of protecting public services, eradicating child poverty and supporting the developing world.
Think how we’d cheer bankers’ bonuses if they resulted from an industry that had also paid billions of pounds in tax earmarked for good causes.
What are the potential downsides?
Of course, the biggest problem with the Robin Hood tax is that the campaigners want to have it both ways. On the one hand, they’re saying that it’s a tiny, tiny tax. On the other, they are arguing that it would raise potentially hundreds of billions of pounds.
It’s hard to see how those two statements can both be true. Regardless of how much profit they make, this would be a substantial increase in taxes on the financial sector.
What do most businesses do when they are hit with higher costs? They pass it on to their customers. While a £20 billion bank tax sounds like a winning solution, most of us won’t be keen to pay even more for our own financial products.
The campaigners say that this could be avoided, as the financial sector is highly competitive and so institutions won’t pass on costs for fear of losing business. However, that hasn’t been the case in other industries – just look at gas and electricity.
It’s also been suggested that the tax would reduce the number of financial transactions made, eventually reducing employment within the financial sector and supporting industries.
And there’s a lot of concern that such a tax would need to be implemented globally rather than just in the UK or even just in Europe. Otherwise, banking firms might simply move to avoid the transaction tax, which could devastate London’s bustling banking sector.
Economist Tim Congdon has estimated that a European transaction tax could cause more than 100,000 job losses in London.
The final word
I think the Robin Hood tax sounds like a good idea for funding some extraordinarily important projects. However, I’m concerned that the cost would simply be passed onto the consumer, meaning even higher bills for struggling families.
What do you think? Is this an idea that could change the world or an idealistic but impractical dream cashing in on the public’s mistrust of banks?
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