Political faultlines over Financial Transaction Tax

David Cameron appears to have forgotten the golden rule of modern politics.  We, the people, lead and they follow, in that public opinion helps makes politicians’ minds up when it comes to the big issues.

The Eurobarometer blogged on yesterday also asked EU and UK citizens for their views on the idea of a financial transaction tax.  In the UK, 53% of respondents were totally or somewhat in favour of such a tax, with 31% fairly or totally opposed.  This isn’t as high as for the EU as a whole, with over two thirds of respondents totally or somewhat in favour, but it is pretty clearcut.  Here, people want to see the banks get theirs.

This is borne out by the reasons why people support such a tax.  Nearly half of UK respondents reckon it will make financial players contribute to the cost of the crisis with a further quarter suggesting it will combat excessive speculation and help prevent future crises.

Yet, David Cameron – and the Tories at home and in Europe – think such a tax is “a bad idea”.  And they claim not to be playing a little Britain card:  their concern is because it would harm people all over Europe.  Kay Swinburne, the Conservative MEP for Wales, said: “It is no secret that the United Kingdom stands to lose the most from the imposition of such a tax.  But I am not here to argue against the FTT as a Brit, but as a European concerned about the welfare of our economy and the future wealth of Europe’s citizens”.

To which, the rejoinder “aye, right” seems most appropriate.  She also claims that the discussion around the tax has not been objective nor evidence-based, accusing EU politicians of not being honest about the harm such a tax would bring to Europe’s savers, financial stability and economy.

Yet, the Tories lost the argument as the European Parliament voted yesterday to support a report backing such a tax.  Indeed, the European Parliament went further, adding to a proposal made by the European Commission in 2011, to extend the tax to securities traded within the EU by financial institutions located outwith.  While the proposal does not say directly that proceeds from such a tax should be added to the EU budget, it does suggest that if this were to happen, member states’ contributions to the budget could be reduced, by up to 50% in such cases.  You’d think this might be up Cameron and the Conservatives’ street.

The rapporteur on the issue, Anni Podamata (Greek MEP, member of Socialist and Democrat Alliance in the Parliament, as are British Labour MEPs), sent a strong message to the naysayers after the vote.

With the EU having the largest financial market, it is up to us to make the first step.  We cannot be held hostage by a handful of Member States.”  She continued: “We should not be afraid of scaremongering by the most reckless of speculators…who say they will leave the continent if there is an FTT. It is time to call their bluff and if some choose to leave rather than change their business model that will also be a positive outcome.  Choosing to let the financial sector off the hook from sharing more of the pain of the crisis would be a decision defying all political logic.  We are elected to serve the 500 million citizens not a handful of traders and their hang-along lobbyists”.

When did you last hear such fired-up rhetoric on these shores huh? And yes, as a Greek representative, you can hear and feel her pain and it would seem as though faultlines are drawn clearly between left and right over the FTT.  Alas, not.

The situation is more complex, leading Scotland’s two Labour MEPs, David Martin and Catherine Stihler, to vote for the proposal while the rest of the Labour MEPs abstained and the SNP’s Ian Hudghton and Alyn Smith to vote against.

The Tories tried to have the proposal rejected outright – this the SNP MEPs (and presumably everyone else) voted against.  There then followed a series of amendments trying to remove the proposal that revenues go to Europe and assert the principle that taxation is for member states (something the SNP held to and was involved in).  These amendments were supported by an odd mix of SNP, Tory and Labour MEPs from the UK, with the Liberal Democrats voting against them, proving that the faultlines are far more fluid than we might think.

For many, including the SNP and most Labour MEPs, the failure to include pension funds within FTT jurisdiction was flawed, because it created exemption status for certain bodies rather than establishing a principle of taxation according to the nature of the transaction.  And as usual, politics got in the way:  because some MEPs were trying to use the FTT proposal as a kind of Trojan horse for the European Parliament to assume direct tax-raising powers, this created a vital fault line that many, including the SNP and most Labour MEPs, could not cross.  Yet, both parties are sympathetic and indeed, supportive of the idea of a global FTT.

Yet, the proposal had enough backing to be voted through.  So that’s that then, a financial transaction tax there will be?  Er, no.

The Council of Europe (where Ministers from member states come together) and the European Commission can just ignore the Parliament’s recommendation.  Even if both institutions did not, unanimous backing is required from the Council to get it through.  And as David Cameron has indicated, that ain’t going to be coming from the UK anytime soon.

A lot of fuss about nothing?  Actually no.

People everywhere want there to be some kind of tax on financial transactions, as well as a check and balance to prevent the kind of risk-taking fiscally irresponsible behaviour, that got us to the brink of Eurozone collapse with teetering national economies, austerity, joblessness and indebtedness.  Despite the misguided nature of parts of the European Parliament’s proposal, it – and the best efforts of most of its MEPs to improve that proposal – represented the democratic will of much of Europe’s citizenry.

The Tories stand almost alone in trying to thwart that.  Which begs the question – whose side are they on?


7 thoughts on “Political faultlines over Financial Transaction Tax

  1. MEPs have approved proposals to introduce a financial transaction tax that would apply to certain transactions between financial institutions when at least one of them is based in the European Union.

  2. Just a precision – ‘Council of Europe’ I think you mean the Council of Ministers/Council of the European Union.
    Thanks for the thought provoking article.

  3. Plaid Cymru’s MEP, Jill Davies voted for this. All the others failed to support it.

    What I can’t understand is why exactly Dave (Cameron) feels he has to defend the city? They have wrecked the economy with their greed, and have cost the ordinary citizen far more in bailouts than they have ever paid in tax. And a levy of a few basis points on high volume speculative trades will only serve to make them a little less reckless. So what is in it for Cameron?

    Another thing that surprises me is how clued up so many people are, when this Robin Hood tax is not exactly a mainstream news issue, and not something you would expect to occupy the mind of the man on the Cwmbran omnibus! Well done the people!

    • Indeed Sion! Interesting that Jill broke ranks with her Alliance….As my piece suggests, the faultlines are not at all clear.

  4. Personally and in addition to an FTT, I prefer the traditional, pre-Deng, Maoist ultimate sanction for repeated acts of financial terrorism: Such a final prospect tends to focus, wayward, looting minds and appetites.

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