I think he’s talking about a banking levy.

I doubt Clegg would support the Tobin Tax, because he’s not an economically illiterate simpleton.

“I doubt Clegg would support the Tobin Tax, because he’s not an economically illiterate simpleton.”

Its founder – James Tobin – was of course an exceptionally economically illiterate simpleton. Having only taught economics at Yale for a few decades…

@ 1 – Why is the Tobin Tax considered an illiterate means by your reckoning?

Thanks for the post. In terms of your last paragraph, I think I should make clear that we’re in favour of reconsidering the Government’s “swingeing” cuts, not the “swinging” ones. Whatever Mr Coxall thinks of our economic illiteracy, I hope we weren’t that straightforwardly illiterate! (BTW – can you be ‘economically’ illiterate – surely innumerate is closer to the mark, unless economcis really IS an art rather than a science?) Sorry, it’s been a long day, and it’s only Monday…..

‘a financial transaction tax to raise more money’

and

‘goose in the City of London that was laying these golden eggs’

Those two arguments are inherently contradictory. You can have, as New Labour did, a tax system designed to siphon off money from a profitable City to do things that need doing. Presumably without scaring the goose off to Frankfurt or New York.

Or you can have a tax system designed to prevent the City hoovering up all the money in the economy and losing it in on some nag in the 4:30.

There’s a Asimov short story that covers pretty much this case:

The goose’s liver contains enzymes which are able to catalyse nuclear reactions. Asimov was a biochemist and his reasoning remains sound in that any metabolic pathway that yields either as much as or not significantly more energy than that contained at the start of the pathway will not negatively interact with cellular proteins. However, the goose would be incinerated should it lose metabolic control of the gold metabolic pathway, as atomic transmutation yields energies 4 orders of magnitude (or 10,000 times greater) than that of a biochemical reactions.

Which is a pretty good description of the the events of the last few years, substituting only ‘financial’ for ‘atomic’.

Anyone who, even with full benefit of hindsight, is not proposing something like the second can’t really criticise previous governments for doing the first.

The Tobin Tax is sometimes used to describe a general transaction tax nowadays

Also, I’m baffled that anyone on the left would refer to it as a Robin Hood tax. A tax named after an economist sounds just a bit more persuasive than one named after a bandit peasant

Half expect progressives to start announcing their support for the Death Tax

And on a similar note, Clegg should probably think through his metaphors a bit more thoroughly.

Labour was bewitched by the goose that laid the golden egg, and now he wants to tax it, to get more money – which I guess makes him the greedy farmer who killed the goose to get at the gold he thought must be inside and fell back into poverty.

Oops

So far as I can tell there is no way whatsoever to prevent the banks from passing on the cost of this tax, therefore all it will do is make everything a bit more expensive. If we wanted to do that then we could just raise VAT.

Oops – I’ve changed the wording Owen, thanks for pointing it out

Falco, some of the tax will undoubtedly be passed on – there’s simply never a way to prevent that (increase the income tax for a premier league footballer and it will find it’s way into a price hike on a pair of trainers he endorses, for example). But compared with any other tax (eg VAT, as you suggest), a Robin Hood Tax would get passed on much less. See the following for more detail:
* http://robinhoodtax.org.uk/debate/the-robin-hood-tax-who-pays-in-the-end-a-former-investment-banker-and-derivatives-trader-investigates/
* http://robinhoodtax.org.uk/debate/ippr-report-financial-sector-taxes/

‘…bewitched by this goose in the City of London that was laying these golden eggs.”

A bizarre argument by Clegg that because the last government relied on ‘ golden eggs ‘ from the City we will tax to try and get more golden eggs.

Of course charities will be favour because they are not paying it. Very easy to be in favour of taxing others especially when the charities hope to be spending the tax.

By all means make an argument that a transaction tax in the City is an alternative to cuts in public spending. However, it is completely disingenuous to use low-income countries as an argument in favour of a transaction tax. How exactly did ‘ gaping budget deficits ‘ occur in low-income countries budgets? Was it because of a fall in international trade? You know international trade that certain mindsets keep telling us is a bad thing. If the ‘ credit crunch ‘ had a direct impact on low-income countries it would have been in their access to international capital markets. As in lending to low-income countries which certain mindsets say is a terrible thing as it gets them into debt.

To lump a transaction tax with concern for low-income countries is to imply that anyone who thinks the tax is a dumb idea must be against helping low-income countries. The best way to help low-income countries is not through charity but by increasing their trade with high-income countries.

The arguments around a Tobin tax were well covered by the much missed Giles Wickes. The Robin Hood campaigners are at best guilty of massively over selling it. Revenue raising is, imho, the wrong thing to think about. More interesting is how various designs of tax on banks would affect their behaviour. As it happens I was in a conference with some BoE wonks today (get me) and various taxes on banks are being seriously considered with regard to systemic risk … this is the thing to watch:

http://www.hm-treasury.gov.uk/press_11_10.htm

Luis, you say that “revenue raising is … the wrong thing to think about.”. The Robin Hood Tax campaign is designed tto raise the money needed to combat climate change (conservatively, £100bn a year), deliver the Millennium Development Goals (about £100bn a year would be just about enough to meet the commitments made by the G8 at Gleneagles) and reduce the public deficits which have been racked up around the G20 to pay for the recession that the finance sector (at least to a large degree) caused. Altogether, we’re looking to raise about £400bn a year around the world. How else would you raise such sums?

Owen, raising funds to combat climate change and to deliver the Millennium Development Goals is all very laudable. However, what you are saying is those who have the largest financial sector should disproportionately contribute. It would not be the world delivering Millennium Development Goals but would in fact be London and New York.

The UK has a comparative advantage in financial services and Germany has a comparative advantage in producing cars. Yet, it is the UK comparative advantage that should pay to combat climate change and meet MDG. Why not campaign for a levy on every car produced since they pollute and are thought to contribute to climate change. I can’t see the German unions being too pleased but that should not be the main consideration.

‘ Altogether, we’re looking to raise about £400bn a year around the world. How else would you raise such sums? ‘

Why not a levy on all the commodity producers in the Middle East like $10 on each barrel of oil they extract or $10 on a ton of Chilean copper, and a production tax for the car producers? That would be more sensible but obviously lacks the knee-jerk populism.

Richard, taxing the finance sector more would undoubtedly mean that the tax would mostly be raised in those countries with the largest financial sectors (although this confuses sectors and countries, and Germany would in fact be the third largest contributor). But then size of financial sector and wealth of country is hardly unrelated.

The main reasons for taxing financial transactions rather than oil and cars are:
1) financial transactions are currently under-taxed compared with oil and cars;
2) the incidence of taxes on oil and car would be greater than on financial transactions, ie the costs would be passed on more to consumers – so a tax on oil and cars would be less progressive than a tax on financial transactions.

However, I’m not ideologically opposed to carbon taxes, which is what you’re essentially proposing, and we may need both.

Do any of the Labour leadership candidates support the Tobin Tax?

Er…. it seems that all of them do. Well, the Robin Hood Tax anyway. The Labour Campaign for International Development have a selection of videos at http://lcid.org.uk/2010/08/23/all-the-leadership-videos-here-in-one-place/ and one of the questions they all answer is about FTTs.

Thanks Owen