“Can a Robin Hood Tax help Labour win the next election?”

Only if the electorate have entirely lost their minds.

“One of the largest and most successful is right here in the UK: the 0.5% Stamp Duty on share transactions raises more than £3billion a year for the Exchequer without undue loss of business.”

You might want to look that up you know. The IFS report on stamp duty on shares shows that it loses revenue overall. Yes, there is tax received from it. But it depresses economic activity sufficiently that it reduces overall revenue.

“It is also capable of raising billions of pounds in much needed revenue ”

Haven’t you read the EU’s own report into it? Showing that it will reduce overall tax revenue?

“Any attempt at rebuilding Britain with ‘one nation economics’ must start with the financial sector paying for the damage”

And we do all know that companies do not pay tax, yes?

I’m sorry to have to say this but this FTT is just ignorance, gross ignorance.

So, many people actually believe that billions of pounds could be extracted in tax revenues without any negative impacts, without losses in jobs, without loss of market liquidity, without increased volatility of prices?

This looks like a classical case of “Don’t tax you, don’t tax me, tax that fellow behind the tree!”

“Yes, there is tax received from it. But it depresses economic activity sufficiently that it reduces overall revenue”

What about the impact of the non financial transaction tax – or VAT as it is more commonly known – where the government decides to impose a tax of 20% on each transaction?

Is that economically illiterate as well?

Don also totally ignores the facts that an FTT will ultimately being paid for by the end user in higher bank charges and lower returns from pensions – far outweighing any tax benefits to the treasury from an FTT.

Aside from that, it would be simple to avoid the FTT for most products, as you would simply trade the products in a domain where there isn’t an FTT. Want to buy UK shares? Buy their singapore listed shares instead. Only the people with limited access to financial markets – small investors – would suffer. How egalitarian.

Lastly, the whole mindset behind those campaigning for an FTT stinks of an jealous, authoritarian leaning, where all assets belong to government, instead of people being able to earn money and invest it as they see fit.

I’m sure some people will argue that the true purpose of an FTT is to stop “unnessecary” trading, but there are easier ways to do that without damaging growth. The EU’s urgency for an FTT seems to fly in the face of their own evidence regarding damage to their economies – suggesting that this is simply a power grab by the EU to raise more direct revenue to spend as they see fit.

That said, I do hope Europe institue an FTT – so we can see how much of a disaster it is, and more of the financial industry ends up in London and Geneva, finally ending this ridiculuous debate once and for all (as happened when Sweden tried it).

Imo, the electorate are fed-up with the system as a whole, not selective parts of it, a Robin Hood Tax will be seen as just another temporary special offer. It looks like Labour really need to pull a rabbit out of the hat, that’s if there are any hats and rabbits left.

Dear me, although I suppose as a ‘spokesperson for the Robin Hood Tax’ you have to blindly fight a corner to protect your income. Nevertheless, lets consider a few of the issues, because there are many.

“thank you to the Robin Hood Tax for saving the sullied reputation of the financial sector.”

Firstly, a robin hood tax is not going to change a culture. That is a bit like saying charging to gamble will make people stop gambling. It won’t. So there is no point telling everyone, or even suggesting it will change a culture. However, it also misses the point of what causes the culture or reckless banking. Take away the protection of too big to fail and it will reign in peoples actions when they realise they will lose everything if they overstep the mark.

“The tax of between 0.1 – 0.01 per cent on financial transactions offers a mechanism to reduce ‘predatory’ financial speculation by targeting computer-driven socially useless trades.”

To be anal I think you mean between 0.01 -0.1, but anyway! First, trades are not there for society so why should we say a trade is socially useless? That is like saying the 07.34 bus doesn’t provide breakfast to the St. Lukes inner city school and it therefore serves no purpose. Secondly, when you apply a tax to something you distort the way in behaves. Great you might think. However the impact of a FTT would only serve to create greater volitility as trades seek to minimise exposure to the tax through larger trades. The damage would be particularily bad for small listed companies who would find it increasingly difficult to raise finance with such volitile markets. So again, not very well thought out. Thirdly, ‘predatory’ trades as you put it make up a tiny percentage of total trades and an FTT will not stop that. The trades will simply be made larger to mitigate the effect of the tax.

“It is also capable of raising billions of pounds in much needed revenue that could help get people back into work, avoid the worst of the cuts to services and ensure we live up to our international commitments.”

No it won’t. This is probably the most simplistic mistake that people who support the FTT make. Who owns shares? is it only “the rich”? of course not. There is NOTHING stopping the passing on of the cost of an FTT to the people who use banks. It is guaranteed that if you impose an FTT you will see the costs sought from consumers through higher rates for accounts, higher charges, increased penalties, lower income with which to employ people, lower wages offered. You see it is the very simple concept of tax incidence. A company cannot pay tax, only the people who have a connection with the company will pay the tax and it is certainly not going to be a few execs at the top that pay the money. It will simply be passed on to you and I as customers. So, by all means if you want banking to become more expensive for ordinary citizens then support an FTT.

“One of the largest and most successful is right here in the UK: the 0.5% Stamp Duty on share transactions raises more than £3billion a year for the Exchequer without undue loss of business.”

Exactly, so why should we tolerate another? And it is utter nonsense that it will not loss business, or indeed operate solely to provide money to the exchequer. That money is coming from somewhere, and that somewhere is peoples pockets. It is also important to point out that if stamp duty raises 3bn a year, how much do you really think an FTT is going to raise? You see a lot of people got very excited by the proposition that there is over 500tn in derivative trades for instance, but they simply don’t understand what a derivative is. They think they can slap 0.01 or 0.1 on 500tn, but they can’t. (Without wanting to spend 20 pages explaining how a derivative works just go and read).

“Of course global agreement would be great”

And also a complete and utter utopian pipe dream.

“Besides, Labour would not be acting alone – all of Europe’s biggest economies, with the exception of the UK are expected to have an FTT in place in the coming months.”

Other EU countries don’t have anywhere near the volume of the UK who would land up footing 70% of the bill. Grossly unfair to UK based companies and therefore UK citizens.

“The biggest economic crisis since WWII was sparked by the banks, but paid for by us.”

No it wasn’t. It was sparked by government and blindly followed by banks, and our money was then used by government to reward the failure. Get the facts right.

“a more balanced Britain away from the capricious excesses spilling out from the Square Mile. It is time we refocused on the other 84,000 square miles that make up these Isles.”

I agree, but there is a simpler answer. Stop the government rewarding failure. The banks who hit a wall should have been allowed to sink. What do you see as the easier answer? (1) Having government secure savings and mortgages and let the rest of the bank go bust (much of the legilslation is already in place) OR (2) Have the government electronically create billions of pounds. Take that money, which is underwritten by the public, and pump those billions into a business that has failed giving it to people who didn’t know what they are doing so that they can continue doing what they don’t understand. Then when the bank is still broke, we continue to rip of the tax payer to the tune of billions whilst imposing liquidity requirements on banks that is drying up funding.

Is there even a debate as to which answer is better? Capitalism without the risk of failure and bankruptcy is not capitalism. It is fascist behaviour from the government, or to give it its sexy name it is corporatism. Governments are systematically failing to appraciate the damage their actions are doing.

The FTT also completely fails to appraciate the ease with which firms can now list in different countries. Just look at Man Utd. They settled on NY as their third choice.

@Tyler
“Don also totally ignores the facts that an FTT will ultimately being paid for by the end user in higher bank charges and lower returns from pensions ”

This totally ignores the scandalous rip off charges imposed by quite a lot of Financial Services companies on mainly unsuspecting clients.
The levels of FTT being proposed could easily be absorbed by these companies without being passed on….in fact if it lead to a review of their charges and more transparency it could even lead to an overall reduction in charges.

“What about the impact of the non financial transaction tax – or VAT as it is more commonly known – where the government decides to impose a tax of 20% on each transaction?”

Oh dear.

VAT is not a transaction tax in this sense. It’s a tax on final consumption. For everyone in the supply chain gets the VAT they’ve paid back. It isn’t 20% on every transaction. It’s 20% on final consumption however many transactions there have been to get there.

The FTT though is a transaction tax. It is charged on each and every transaction. For example, much pasta eaten in England is made in Italy from Canadian wheat (yeah, I know but it is). So, our Canadian farmer uses the futures markets to hedge his prices. Taxed. The Italian pasta maker hedges again. Taxed. The commodity company in the middle probably hedges as well. Taxed. Then there’s the C$ to € to £ stuff, all taxed again. Plus however many trades are done by the speculators who are carrying that risk (which is the point of these futures markets. They don’t work without speculators). And that’s a really simple set of transactions: but they’re taxed the full tax, with no rebates, at each and every stage.

Oh, and each and every money transfer of course.

There is a reason why Sir James Mirrlees (note, not just a Nobel Laureate but one who got it for the study of tax systems) says that transactions taxes are a bad idea. Because they cascade through the economy in exactly this manner.

Yes, agreed, this is a technical point being made by someone who really does know what he’s talking about. So unlike modern politics, eh?

Mirrlees even points out that applying VAT to the finance sector would be a much better way of trying to do the same thing. Because it’s a one off tax on consumption of the output of the sector, not a transactions tax. And I’ve no problem with VAT being so extended. We’d probably not want to put VAT on interest payments but fees and the like, sure, why not?

Thing is though, no one really thinks it would raise much money. Because banks would be able to reclaim the VAT they currently pay. Something they cannot at present.

@Tim

Yes but other duties such as fuel duty are applied multiple times through out a process – take your pasta example, each time it is moved someone is paying fuel duty. In the end it is simply absorbed

In fact it is seen as a way of changing behaviour – so you have the Tories Fuel Duty escalator in the 1990s puching up fuel so that businesses and consumers use less or buy more effecient vehicles.

So the same with FTT, one or two practices which give marginal returns (like very rapid trading) will be ditched. Which may well be a good thing as it could reduce volatility.

blimey, the right wing naysayers got in quick with all their heavily researched talking points, didn’t they ?

Which indicates that they’re worried about what a good idea it is.

@7 Redfish

Let’s take an example to illustrate my point.

You want to buy a house, so you take out a 25 years mortgage from a bank. You would think that a bank could swallow the 0.01% FTT and not pass it on to you, right?

Unfortunately for you, and most proponents of an FTT, you’d be completely wrong.

By giving you a mortgage, the bank has lent long (25 years) but to cover that money, it has to borrow in short dates (out to 3 months ish) from the money markets. if you have a fixed rate mortgage the bank has to do an interest rate swap to hedge out that risk as well.

So, to lend to you for 25 years, the bank, assuming it rolls that short term borrowing every 3 months, has to do 100+ transactions, each hit by the 0.01% FTT. So that 0.01% extra tax will end up looking more like 1% to the end user – you.

If, as usually happens, the bank borrows in the money markets on an even shorter term basis (one day to one week is the most liquid part of the money market curves) the bank would have to do even more transactions. That 1% starts to look more like a best case scenario.

This of course will make credit much more expensive and harder to obtain, and money markets will be much more expensive. In short, it will be harder to borrow or lend money, and the system of credit creation/fractional reserve banking our economy so relies on will be heavily damaged.

This is why the FTT is so dangerous. It’s a compounding tax, because most financial products used even on a day to day basis are made up of a significant amount of underlying transactions which need to be managed – like mortgage repayments and bank financing for it – which means the tax isn’t levied just once at a tiny level – it’s levied many times at several levels, multiplying up the level of the tax hugely. The arguments about an FTT on “predatory” trading is just a sideshow, as these trades tend to be directional and financed or in derivatives, meaning an FTT will barely affect them – maybe apart from high frequency trading.

What an FTT will do is make the cost of money and the cost of credit far higher, and that will dramatically affect growth.

“blimey, the right wing naysayers got in quick with all their heavily researched talking points, didn’t they ?”

How very kind of you to say so. Given that I’m the only person who has actually published a peer reviewed paper on the subject. You know, in a proper scientific journal with all the academic bells and whistles.

Everyone else has just been pumping out propaganda. So “heavily researched” is quite a compliment.

@10

“blimey, the right wing naysayers got in quick with all their heavily researched talking points, didn’t they ?

Which indicates that they’re worried about what a good idea it is.”

Good lord. Is it a sin to actually research something nowadays? or would the left just prefer blind allegiance…oops don’t answer that. This is not new research, this debate keeps rearing its thick head on and off. The numerous arguments against a FTT aren’t any different.

And how does heavily researched counter points prove what a good idea it is?…have I landed in a parallel universe? Nope, I’m just reading nonsensical counter intuitive points on LC. Extrodinary.

@Tim Worstall. you’re welcome )

However, did you publish in Nature or the Journal of Physics? Cos they’re “proper scientific journal with all the academic bells and whistles”. Economics may rule the world, but it’s not science as most of us understand it.

However, did you publish in Nature or the Journal of Physics? Cos they’re “proper scientific journal with all the academic bells and whistles”.

Well, no, not really. ‘Coz they don’t publish chemistry in the Journal of Physics and they don’t do physics in the Journal of Economics.

They do rather tend to be subject specific.

As to economics ruling the world, well, sadly, it’s the bit of economics that is mostly wrong that does that. The macroeconomic stuff about the whole economy. As an analogy it’s about at the stage where chemistry was when people were arguing about phlogiston or oxygen. This might be a slight exaggeration but I’m not sure that there’s any macroeconomic theory at all that you could get all currently extant Nobel Laureates to sign up to as being true.

In microeconomics we do know quite a lot that is true.

Sadly, the arguments in favour of the FTT seem to come from macro, the ones against from micro…..

Brings to mind Piltdown Man

Sadly, the arguments in favour of the FTT seem to come from macro, the ones against from micro…..

nope, this idea that if an FTT is imposed the level of economic will fall to the extent that the net change in real tax revenues would be negative, is from a macro model, I’m sure.

the idea that if the FTT stops high-frequency trading, bank reliance on short-term funding and other varieties of frequent trade, that might help with financial stability, is more like microeconomics. Although you could say network stability analysis sits somewhere in between, it is the study of a particular market rather than the macroeconomy.

imho a Robin Hood Tax could help Labour win the next election, not only if the electorate have entirely lost their minds, but just because the tax looks like it’s being paid by greedy bankers, plus the idea of raising more tax revenue from the financial sector and its customers looks attractive compared to most other means of raising tax revenues, and some theoretical prediction that real tax revenues would actually fall have absolutely no impact on voters, for sensible reasons.

“Which indicates that they’re worried about what a good idea it is.”

Here is a guide to the Politics of the right:

Lansley’s NHS reforms get opposed by the BMA, RCN, the vast majority of people working in the NHS. Must be producer interest.

IDS’s housing benefit changes get oppposed by homeless charities, housing associations, the private rented sector and everyone who deals with it. Must be producer interest.

Gove’s education proposals get opposed by the teaching unions, education professors, childrens groups etc. Must be producer interest.

The IPPC regularly calls for a reducation in CO2 emissions and for all countries to adopt policies that facillitate this. Must be producer interest.

A consortium of businesses produce a report calling for greater investment in public transport in the region they are based in, saying that this investment will have major economic benefits. Must be producer interest.

The financial industry leads a large lobbying campaign against a proposal to impose a 0.01% tax on its transactions, saying that to do so would tank the economy back to the stone age. Sound economics.

@Freeman
In respect of the Financial crises….

‘It was sparked by government and blindly followed by banks, and our money was then used by government to reward the failure. ‘

Many people actually though the financial meltdown started with toxic assets in America; Banks such as Bear Sternes ,J P Morgan overseen by the likes of Standard and Poor flogging sub prime mortgages. Perhaps you could elaborate.

Given that you have researched you previous response can you post (in future if not now) your sources.I would be interested.
As regards to letting Banks fail,would you have the same view if you were a depositor in said bank. Sadly the fall out and all those resulting poor people would surely cause a drain on state resources albeit in another way.

As regards the FTT, surely in an international trading environment such as London a considerable number of trades will be international and therefore not necessarily damaging to domestic populations. In any event your comments seem to preclude the idea of any redistributive mechanism either toward restructuring the economy or digging the poor out of poverty. Perhaps you could clarify.

Is it the case that you don’t feel the state has a role in the economy at all?

“Oh dear.

VAT is not a transaction tax in this sense. It’s a tax on final consumption. For everyone in the supply chain gets the VAT they’ve paid back. It isn’t 20% on every transaction. It’s 20% on final consumption however many transactions there have been to get there”

As redfish points out, there are numeorus taxes at every stage of the supply chain, not to mention an administrative cost to reclaiming VAT. Even so, the point I’m making stands – the govt raised taxes on the vast majority of end point transactions by 2.5 points, and few people batted an eye lid.

There are some legitimate points about the compounding effect that an FTT would have and how that gets passed to the consumer. But none of them I think undermine the central principle behind support for the FTT that the financial industry should be be paying a great deal more in tax, and that many percieve short term price volatility and financial speculation as acting like a parasite on the real economy. Some of that is wrong, but it’s understandable. It amazes me that an industry that is so wealthy can’t even be bothered to hire a decent PR company to explain itself and the wider benefits of what it does – even big pharma manages to do that. It creates the impression of something to hide….

“The financial industry leads a large lobbying campaign against a proposal to impose a 0.01% tax on its transactions, saying that to do so would tank the economy back to the stone age. Sound economics.”

The thing is, I can’t see any evidence of a large lobbying campaign against the FTT. And I am the sort of person that would see it if it were there I think. I did indeed get paid to write a paper on it. £200 in fact by the IEA to pull together some evidence for the HoL. Which isn’t evidence of large anything.

The people with the big campaign, the Richard Curtis directed movie clip, the support of the TUC (including at least one senior staff assigned to it) are the Robin Hood Tax people.

RHT must be spending tens of thousands at least, if not hundreds of thousands. And believe me, there really isn’t that amount of money running around among the people trying to point out what a bad idea it is.

“It amazes me that an industry that is so wealthy can’t even be bothered to hire a decent PR company to explain itself and the wider benefits of what it does”

That part is really what amazes me too. I’ve discussed this with several in the industry. It amazes them too.

There really isn’t a large or even small and badly funded campaign against the FTT.

It’s probably because the idea of forming a trade union or professional association to do these things doesn’t really appeal to people working in the city on a subconscious level.

@ 21 Planeshift

Let me simplify my earlier post even more.

Banks will nearly always pass the cost of any tax on to their customers – especially if it means that to do the business will be unprofitable.

A 25y GBP interest rate swap is at 2.85% roughly. A 25y mortgage is roughly 2.25% above that, at 5.10% (good enough for this example, derived from 10y fixed mortgages and 10y swaps). The difference is the credit spread a bank charges it’s customer for the risk the bank takes on that customer not repaying, plus all the other costs associated with the transaction hedging, plus some profit.

((before you start arguing about how much the banks are charging for this spread, consider that the credit spread for the UK at the moment is 0.5%, France 1.10% and Italy 3.30%, and they are sovereign countries!))

If you put an FTT in, you can conservatively add 1% to the cost of hedging and funding a mortgage. It could easily be a lot higher. At the last bank I worked for we did a quick analysis of the costs it would imply for the banks ALCO and mortgage books, and we came to an answer closer to 2%, mostly on the back of decreased liquidity and increased costs in money markets.

So, instead of your mortgage costing you 5.10%, it is instead going to cost you somewhere between 6.10% and 7.10% and that’s assuming there aren’t any second round effects in the markets from an FTT.

Now compare that to a hedge fund who wants to trade some interest rate swaps on a *purely* speculative basis. The bid/offer spread on a 25y IRS is about 2bp (0.02%). He now has to pay an extra 1bp (0.01%) to get into and out of the trade, doubling his effective spread. He might be less likely to trade, but if he wants to the marginally wider spread will not stop him.

And the increased cost of trading for the hedge fund is effectively some 50-100 times smaller than the increase in costs for the man on the street who just wants a mortgage.

So, by implementing an FTT, it’s not wall street you are affecting, it’s main street’s Average Joe.

@19

In the US during the early 1990′s Clinton and Cuomo put in place a policy (and legislation in the form of the Community reinvestment act update) to enable US citizens to buy their own home. Russell Roberts of George Mason Uni conducted research into the restraints on mortgage lending in the early 1990′s and as his research shows those restraints were effectivly swept aside. As a result loans flowed out the door to low income and below median households that could have never, under an operational market, been lent. It was simply too risky. The default rate was way in excess of accepted market standards. This was of course done through Freddie Mac and Fannie Mae and by using vast somes of credit which was too cheap for anyone to compete with (having been issued from the government) it quickly filled the market. This reckless behaviour was only reinforced by George Bush through the Dream downpayment act.

The staggering statistic is that by 2007, 55% of loans made by Freddie and Fannie were to below median income house holds, and remember this was from a two state sponsored enterprises. It was more than 3tn in toxic debt. Nicely packaged up and sold to every bank and institution around the world. Who wouldn’t buy and trade in it? it was guarnteed by the government.

The Fed didn’t help. They figured out that bad economic growth was bad for elections. So everytime there was a scare, the fed dropped interest rates filling the market with cheap credit and avoiding a down turn, and fueling debt expenditure. Well in 2008 the luck ran out.

The banks were indeed selling toxic loans, and that why I said they blindly dealt in products they didn’t understand. Those loans though could not have existed without the cheap credit of the government though and the guarantee they provided. Investing in that as a bank without the govt distortive effect would be like a mortgage broker taking a down payment on a mortgage and putting it on Badger the 3.17 at Kempton.

“As regards to letting Banks fail,would you have the same view if you were a depositor in said bank.”

As I said savings and mortgages should be safeguarded, and as I also said the majority of the legislation is already in place. The losses would have been bourne by the stock holders in the bank, the bond holders, and other parties such as landlords of the bank etc, etc. And yes, those people should have lost their money. That would have included me (Luckily I only had a small amount of bank stock). But we cannot take away the risk inherent in capitalist societies. We must have the failures to support future businesses that are smarter and more innovative.

“As regards the FTT, surely in an international trading environment such as London a considerable number of trades will be international and therefore not necessarily damaging to domestic populations.”

Well no because it will still be the UK intitutions that are having to pay the tax. That will still mean lower profits, lower wages for workers here, lower employment rates. It will untimately fall on the people to pay. It will also of course fall on international parties, but not solely.

“Is it the case that you don’t feel the state has a role in the economy at all?”

That would be anarchy. I don’t support that. The question is the extent of the role of the government. I believe that the more a government does the less freedom we as people have. It is a mistake to put ‘equality’ as a concept to be strived for above ‘freedom’. For reference purposes there are many thinkers FAR more intellegent than I who have provided the reason why (Hayek, Schumpeter, even Keynes in a slightly different way). But you don’t need their opinions to work out why if you enforce ‘equality’ before ‘freedom’ why you will land up with neither.

“It amazes me that an industry that is so wealthy can’t even be bothered to hire a decent PR company to explain itself and the wider benefits of what it does”

yep. Just to pick a quick example, if I had to list what the finance industry contributes to society, somewhere at the top of its list would be that equity markets, complete with speculators, provide an exit for earlier stage investors, and without them we’d see less earlier stage investment.

my guess is you could ask a lot of people what good things like the stock market do before you’d find somebody giving that answer. But it’s a very simple one.

my impression is there are a lot of people who have opinions about the need to make the financial sector contribute to the “real economy” etc. who don’t know as much as they might about what the financial sector contributes to the real economy.

the answer, of course, is that for ages the City hasn’t cared what people think of them so why pay for PR?

“The thing is, I can’t see any evidence of a large lobbying campaign against the FTT.”

Really Tim? I guess it depends what you mean by a large lobbying campaign

http://www.thebureauinvestigates.com/2012/03/26/cruddass-tobin-tax-boast-speaks-volumes-about-premier-league-lobbying/

http://www.thebureauinvestigates.com/2011/09/30/hedge-funds-financiers-and-private-equity-tycoons-make-up-27-of-tory-funding/

instead of your mortgage costing you 5.10%, it is instead going to cost you somewhere between 6.10% and 7.10%

Tyler I hope you won’t be offended by: [citation needed]

@25 Freeman

‘But you don’t need their opinions to work out why if you enforce ‘equality’ before ‘freedom’ why you will land up with neither’

I think its important to define what ‘freedom’ you actually mean here. If we are talking economic freedoms then I would have thought the optimal level of freedom would be reached when everyone had equal access to economic choice.(I would have thought that many if not all freedoms stem from this although I haven’t thought about this.) The converse is to suppose that, in an unequal society, the idea of freedom is a sectional interest only enjoyed by the wealthy in order to protect their wealth.
In any event I am not sure who initially brought up the issue of equality.

”Is it the case that you don’t feel the state has a role in the economy at all?”

That would be anarchy. I don’t support that. The question is the extent of the role of the government.”

OK so what extent should the Government go? Clearly no Government has ever talked about equality except vaguely in terms of health and opportunity. Should the government ignore homelessness, unemployment, the working poor etc?

@ Helen GB #10
The reason why the right-wingers do research is that they like to be right.
Several months ago, in response to the self-styled tax expert Richard Murphy, I produced some data on how many thousand transactions on AIM each month would generate tax revenue of less than the cost of a second-class stamp if the FTT tax should be imposed. Murphy who had obviously done no serious research denied it was a problem.
Chouffot’s research is blatantly lacking since Sweden, having tried it once, has declared it will *not* try a FTT again and he seems completely unaware of the biggest economic crises since WWII. The Arab oil embargo and tenfold rise in the price of oil mattered a lot more in real terms than a few banks going bust – a fairly common matter in the USA – but because the “Seven Sisters” were in the private sector they managed to distribute oil to their customers without breaching the embargo or bringing economies to a standstill. The Savings and Loan crisis in the USA involved more banks going bust that the recent sub-prime crisis (which wasn’t actually Clinton’s fault although he made it for small-time crooks to rip off Fannie Mae).
The financial crisis has not been paid for by “us” unless “we” were shareholders in banks before the bubble burst. Darling bought major stakes in RBS and Lloyds at a major discount to asset value and stole Northern Rock which even his poodle accountant admitted had net assets of £2.5 billion until he assumed that the Bank of England would default on its statutory obligations to the banking system.
Some “heavy research” by the left-wing would be nice: whether I shall live to see it is debatable, however.

@ 28 Man on the Clapham Omnibus
While I am in favour of the government taking a role in supervising the economy it would *not* be anarchy if it did not. The economy is *not* a core function of government.
The core functions are law, justice, and protections from invaders and criminals. Heslth and education are secondary, the economy tertiary.
Freedom includes being able to stand up for your rights against the rich. It does include nor imply economic equality, which is unnecessary for this. The contrast 1945-90 was between the “Free World” and Communism – I accept that freedom in the west was far from perfect and Soviet Russia was more unequal than Thatcher’s Britain but this portrayal would have collapsed in minutes if people thought that freedom depended upon equality.
Liberte, egualite, fraternite – the right-wing chose liberty, the left equality and the church fraternity.

@ Jon #27
Do you know how Hedge Funds operate? The majority seek to exploit inefficiencies in market prices. The FTT by bearing disproportionately on small transactions will increase market inefficiency. So Hedge Funds should be lobbying in favour of a FTT, while Cruddas is talking sense. So your two examples are countering each other and certainly not evidence of a major lobby in one direction or the other.

@ Luis

I just looked up 10y IRS GBP rates on bloomberg, then quikly looked up (via google) some comparative fixed rate 10y mortgages. I then extrapolaetd roughly to 25 years as the actuarial average mortgage takes just under 25 years for people to pay off.

I have done this very roughly, but the point I am trying to make is valid, if not underplayed. I’ve assumed that banks borrow in the money markets for 3 months at a time. In practice, the bulk of money market funding is in even shorter terms – a day to a week – which if an FTT was charged would increase the cost of funding by an appropriately compounded amount.

An FTT would crush money markets, which in turn massively reduces the amount of credit that can be extended (by increasing it’s cost). Interest rate curves would be far steeper, so borrowing would have to be far shorter in duration, removing the main purpose of banks – maturity transformation – and destroying much of the fractional reserve banking system.

All this talk about how much money it would cost or raise etc is pissing in the wind in comparison to the effect it would have on credit, which would smash M4 money supply into the ground, with the subsequent effect on GDP.

So, by all means try it, but don’t say I didn’t warn you.

There are lots of objections to a “Robin Hood tax”, and many of them have already outlined above.

May I add one further objection of my own? And that’s to the assumption, beloved of supporters of such a tax, that any revenues thus raised will necessarily be devoted to laudable ends.

It just doesn’t follow, politicians being what they are.

But I guess that a campaign based on “let’s have a tax on financial transactions to enable tax cuts for the rich/another act of armed aggression against a foreign country/further investment in nuclear weaponry” wouldn’t have quite the same ring to it.

The Robin Hood tax seems to come around a lot on LibCon. And every time some very clever and knowledgeable people go head to head. As a fairly unknowledgeable bystander, I’ve read the cases for both sides and come to a conclusion. Imposing an FTT seems risky and no-one seems to think it’ll raise much tax. So I don’t see the point.

Maybe our esteemed Mr Osborne should be looking at how he can spend less rather than taxing more so he can keep squandering OUR money on useless stuff. Do I need to list how he has thrown our money away? No, I thought not.

The thing is, I can’t see any evidence of a large lobbying campaign against the FTT

I suggest you have a look in the mirror.

You really are beyond parody Timothy.

@36. I hardly think that one sole individual leaping up and down and shouting about how stupid it all is is a “campaign”. Or large or even lobbying.

How glorious to see the pseudo-libertarian piggies squeal like gudd’uns above. Shows they’re scared. And they should be. They REALLY should be.

@37 I hear hiring students to infest the comment boxes of news and political websites with particular political points is proving quite successful in shifting public opinion in a given direction.

Robin Hood tax would only work if it was an international tax and for that we would need an international agreement. Whether you like it or not, despite the Crash, our economy still needs a thriving services sector and that includes the financial sector too. Reforming our banks is very good but to have a tax solely on them will be very bad for the economy.

I hardly think that one sole individual leaping up and down and shouting about how stupid it all is is a “campaign”. Or large or even lobbying.

Any article on here prominently mentioning FTT and you’re nearly always one of the first half a dozen commenters.

Which indicates you’re either obsessively checking the site for such instances or you’ve got an RSS feed set up to flag such articles, now why would you do that? Fortunately you’ve already told us why.

http://liberalconspiracy.org/2011/08/22/it-may-be-really-unpopular-but-heres-why-pfi-wont-be-banned/#comment-306570

Excellent: incentives matter, even to politicians. Especially perhaps.

http://liberalconspiracy.org/2011/06/08/caroline-lucas-launches-campaign-on-tax-evasion/#comment-276778

Incentives matter, see?

http://liberalconspiracy.org/2010/09/03/17327/#comment-170952

Please don’t forget the third rule of economics (the first two being incentives matter and TANSTAAFL)

http://liberalconspiracy.org/2011/06/08/caroline-lucas-launches-campaign-on-tax-evasion/#comment-276778

It’s not a right wing question, not a left wing one. It’s simply an exploration of the most basic economic point, that some incentives matter.

After all a rational actor such as yourself wouldn’t debase himself for free would he and if you’ve been paid, that means the ASI has, which indicates that indeed there is a ‘lobbying campaign’.

Of course if you feel I’m mistaken open up your list of donors and clear the whole thing up.

“After all a rational actor such as yourself wouldn’t debase himself for free would he and if you’ve been paid, that means the ASI has, which indicates that indeed there is a ‘lobbying campaign’.”

That’s an amazing logical construct you’ve built there. You’ve managed to start with the truth that Lib Con is in my RSS feed and prove that therefore the ASI is being paid to oppose the FTT.

There are a few problems with it. For example, rationality does not mean that people only do things for money. They sometimes do them just because they’re enjoyable (rationality is about increased utility, not increased income). Or because they think they’re the right thing to do etc.

The only payments I ever receive from the ASI are freelance fees for pieces which appear on their website. I do not receive a salary from them. I am not, categorically, paid by anyone at all to post here.

Hope that helps….