Osborne has had a Thatcher handbag EU moment over Tobin Tax
So Berlusconi is off, possibly, but will it truly be the end of Bunganomics? That depends on the election result, so for now I focus on another matter that I have been following for a decade now. The long saga of the Financial Transactions Tax, also known as the Tobin Tax and the Robin Hood Tax.
Extraordinarily, and bizarrely, TV cameras were inside today’s EU finance minister’s meeting in Brussels and actually recorded some of the proceedings, including a 5 minute attack by George Osborne on European Commission, and Franco-German plans to levy a small tax on all financial transactions. Watch it here:
I have never seen TV footage like this, but helpfully for the Chancellor, it shores up his euro-realist credentials in his own party. He has managed to maintain an air of the reasonable on this issue. Britain does not oppose this tax out of principle, but out of practice and pragmatism that it will not be repeated across the world.
He claimed that the European Commission’s own report into its FTT proposal showed it would reduce EU GDP by 1.76% or destroy 500,000 jobs. This is, he says, not the priority at a time when in earlier discussions the finance ministers had suggested ideas to boost growth. He then, gesturing with his fingers counted four ways in which the annual predicted €57bn proceeds of this tax had been spent four times over, expressing particular concern that UK was already on track to meet its aid budget so didn’t need such a hypothecation of a damaging charge.
For good measure he finished off saying that he backed taxing the banking sector, and so why doesnt the EU copy the coalition’s bank levy. It was a strong performance, as I said incredibly coincidentally appearing on our picture feeds. The Swedes were also very public in their opposition. The Polish Finance minister, and Ecofin President admitted to fierce discussions in the meeting.
“I suggest that we put to rest the idea that there is going to be some European financial transaction tax,” said Mr Osborne.
The Commission categorically denies the 1.76% number, saying that it referred to versions of the tax that have beenn specifically excluded. It says once the impact of the investments from the €57bn a year is taken into account then the FTT will have a positive impact on growth. and crucially it says that the jobs numbers are exaggerated, as much of the impact of the FTT will fall on automated trading by robots, with a “limited effect” on jobs.
Unless Germany and france are playing a classic game of bluff and persisting with this policy for purely cosmetic reasons, knowing that UK/US will veto it (which I’m assured they are not) then the stage is set for a big battle over this. And it might have some ramifications within the Coalition too. For now, the Chancellor has found a cause celebre to defend Britain. This is just the start.
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