As Larry Elliott has noted in the Guardian, Labour appears to be committing itself to a financial transaction tax for use on the financial services sector, if it is elected.
I unreservedly welcome this. Such a tax has long been the goal of tax justice campaigners. It helps address the issue, long noted on all objective sides, that the financial services sector as a whole is undertaxed, not least because it enjoys VAT exemption. But as important, it stops the churn that no doubt still happens far too often at cost to investors who suffer promises from fund managers that their trading track record cannot justify.
The tax is small. The impact cannot be known as the behavioural response will be hard to assess, and attempts to avoid it cannot be entirely predicted. But Larry is right to say:
The shadow chancellor mentioned last week some of the things that Labour could do with the £35bn that an FTT could raise in the course of a five-year parliament: putting it towards retrofitting homes, so that they are carbon neutral, or on a major expansion of wind and solar power. The public will like that. Outside of the City, there won't be a lot of hissing.
I agree.
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It would at least indicate a degree of consistency in social policy since all other manifestations of the gambling industry are subject to some degree of taxation.
Except that doesn’t pay for anything.
Nigel Hargreaves says:
“Except that doesn’t pay for anything.”
Well, yes, we accept the tax doesn’t actually pay for anything mantra, but there are good reasons to levy taxes to modify behaviour.
John McDonnell, even if he accepted the MMT logic, (of which there is considerable doubt) couldn’t sell the idea on that basis. Neither to his own party members nor even the rest of cabinet. So he’s not even trying to; he’s using the orthodox language and pro tem we have to live with that. I think ….. (?)
You’re right
I’m glad you mention ‘churn’ it’s it’s like rats nibbling at the sacks in the granary,
presumably a modest transaction tax would go a long way to nerfing HFT, high frequency trading,
I can’t think of one good thing to say about HFT but endless things against it!
If it’s true that
a/ The government has a monopoly on the issue of pounds in the UK and
b/ A pound is simply a government IOU (“I promise to pay the bearer on demand the sum of one pound”) and
c/ The government spends money by entering numbers on a computer (thereby crediting the bank accounts of payees), then it follows that
1. There is no limit, in principle, to the amount of money the government can spend.
2. The government doesn’t need to collect taxes in order to pay for spending. (Why would the government want to collect or borrow its own IOUs?).
3. Questions such as “How are you going to pay for it?” are meaningless – the government pays for anything it wants by issuing pounds.
4. The whole idea of a “fiscal rule” is nonsense — the government can always service and repay any amount of debt (as long as it’s in pounds) simply by entering numbers on a computer.
Bear in mind that, when the government spends money, every penny goes into the bank accounts of individuals and businesses around the country, increasing their purchasing power. Meanwhile, taxes take money out of circulation and reduce their purchasing power.
It follows that budget deficits (a net increase of money in circulation) boost economic activity, business profits and people’s ability to save, while balanced budgets and budget surpluses have the opposite, negative, effects. (Contrary to conventional wisdom, budget deficits also lower interest rates).
What about the inflationary effects of “too much” government spending? Japan has run enormous budget “deficits” and accumulated a huge public “debt” over the past two decades but it has close to zero inflation and one of the world’s strongest currencies.
Labour shouldn’t be focusing on how much tax it can collect if it wins power. It should be considering whether we have the human, technological and other real resources needed to begin repairing the damage done to the country’s social and physical infrastructure over the past decade and how we can to try to catch up with the rest of the developed world.
Great news but I am not at all surprised having
Been to rallies with John McDonald speaking
On the subject. It’s over 10 years ago we produced
The Stamp our Poverty film when Brown
Who was not yet in power promised to
Bring in the CTT when he became PM.
Since Labour we have had years of austerity
Under Cameron and Osbourne which
Achieved nothing other than the destruction of
Our services, including under funding of
Councils so anything good in social care has
Been cut with disastrous results.
I am praying for a Labour government
I have read their manifesto and it is storming
Everything I want for the good of our country
Right wing press will continue to trash
Corbyn and McDonald – I wonder why?
Panama papers tax havens all the things
You have worked for years to expose
Richard. Bring it on . Just give them a chance
It can’t get any worse than under Eatonian
Tory rule
With the likely outcome of another hung Parliament and with the LibDems stamping their foot and refusing to play I fear McDonnel’s idea may not be arriving any time soon. That means that any reforms we do see are likely to be neo-con in nature.
Our current chancellor was a managing director selling risky derivatives for Deutsche Bank in return for around £3,000,000. When the bubble burst he went into politics but before he did his bonus was transferred through the Cayman Islands using a scheme called Dark Blue Investments avoiding 90% of tax otherwise due. Behind him stood stalwart Tories like John Redwood who in 2007 issued a report called ‘Freeing Britain to Compete’. At the time warning bells about the delinquent nature of the financial sector were ringing loud and had been for some time (see John Gray’s False Dawn 1998). That was no deterrent. Redwood’s report included many, many statements like this;
Our aim is to liberate the economy from the burden of unnecessary regulations……………
or
A Conservative government should relax banking regulation, allowing a new breed of venture/micro-credit institutions…………….
Javid and Redwood and their ilk have not changed their spots. Unless left leaning voters put a Labour Government in power the Tories will continue to line their own nests. That means, for some, holding their nose and voting for Corbyn. A no-deal Brexit is the neo-cons playground.
http://image.guardian.co.uk/sys-files/Politics/documents/2007/08/17/ECPGcomplete.pdf