The Independent View: The Robin Hood Tax

At the height of Make Poverty History back in 2005, in the Cabinet Room at No 10, Richard “Four Weddings and a Funeral” Curtis asked then PM Tony Blair, “would you mind if I showed you a video I’ve made?” It’s not the same as some bloke at work offering to show you his holiday snaps. So when Richard Curtis showed his new Robin Hood Tax video to some of the 85 national organisations supporting the latest big campaign in the TUC General Council Chamber earlier this month, we knew we were in for a treat. There’s already a German version, made with different actors. But the message is the same: we’re calling for a small tax on financial transactions to pay for big change for everyone.

Transaction taxes have a lot of popular support (the campaign’s facebook site attracted 100,000 fans in just nine days), but also a lot of heavyweight supporters. European leaders in Austria, France and Germany are supportive. Economists like Jeffrey Sachs, Paul Krugman and Joseph Stiglitz are high profile backers, but the campaign has released a letter from 350 economists around the world who support the idea. In Britain, Vince Cable, FSA chief Lord (Adair) Turner and Gordon Brown have all backed transaction taxes.

The devil, of course, is in the detail. What we are proposing is a tax varying from as little as 0.005% on wholesale currency transactions up to the existing 0.5% stamp duty on share trading. Some of the riskiest behaviour – such as betting on currency movements over hours or even minutes – will decline in response to such a tax, and that’s no bad thing. But even so, we have calculated that if implemented globally, such taxes could raise £250 billion a year for public services, tackling global poverty and coping with climate change.

The question we’d like to put on the political agenda, however, is not “should we have a Robin Hood Tax?” It is the rather more pressing question of how else we are going to pay for the costs of the global economic crisis. The bank levy that President Obama has suggested is a sensible way to insure against the costs of bailing out the banks. But that doesn’t address the damage caused to the public finances by the impact that the financial crisis had on the rest of the economy. Across Europe, 7 million people lost their jobs over the last couple of years. Globally, over a trillion dollars was pumped into the world economy to stabilise, shorten and reduce the depth of the recession. It was the right think to do. Across the OECD, more than ten million jobs were saved.

But now we need to find a way to pay for restoring the public finances, as well as tackle the unfinished business of the Make Poverty History campaign (even the pledges on overseas aid made at the Gleneagles G8 have fallen $22 billion short) and make a start on the challenge that the Copenhagen climate conference failed to address. No opponent of the Robin Hood Tax has said how else those challenges can be met, but the answer is clear. Massive cuts to public services on the one hand, or huge increases in other taxes like VAT.

There are still issues to be worked out about how precisely to introduce the tax, what precise transactions should be covered, how to ensure the costs aren’t simply passed straight on to consumers. We don’t want to make an enemy of the bankers whose activities will be taxed – we want them to help design the system so it works.

Getting agreement on a global tax won’t be easy  The Government could make a start with a small currency transaction levy in the Budget next month – which would still raise billions. The European Union could implement a continent-wide transactions tax, and show the leadership it needs to show to keep Europe working and keep it popular with its citizens.

But if we don’t start discussing what we are going to do, and how it can be done, then we will be left with a huge hole in the public finances, people continuing to die of treatable diseases in developing countries, and deforestation, floods and famine as climate change takes hold.

Richard Curtis is keen on happy endings, as his movies show. That’s essentially what the Robin Hood Tax could be. Turning a crisis for the banks into an opportunity for the world.

Owen Tudor is Head of European Union and International Relations at the TUC.

The Independent View‘ is a slot on Lib Dem Voice which allows those from beyond the party to contribute to debates we believe are of interest to LDV’s readers. Please email [email protected] if you are interested in contributing.

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59 Comments

  • Geoff, I found your comment deeply amusing. This line in particular: “I think you need a PHD in economics to work out whether a Robin Hood tax or a Tobin tax will actually work in real life.”

    You say this, then support a piece from a chap at the TUC whom, as far I’m aware, doesn’t have a PhD in economics. The article rather neglects to mention that all the people who support it who do have PhDs have doubts about its implementability, and that the people with PhDs who don’t support it point out that it’d be impossible to implement a tax of this nature without providing a way to get around it.

    Speculative activity isn’t bad in and of itself; certainly it can have negative impacts as it represents the collective selfishness of the entire market, but it wasn’t the cause of the recession. I’m going to side with the people on the PhDs on this one: don’t support the Robin Hood tax until they’ve actually worked out all the ‘issues’. I’m not convinced they can.

  • The last thing we should do is give the Government more money. They are like drug addicts, and they’ll just blow it all on crack again.

    We need to address the root cause of the fiscal crisis, not keep feeding Ministers’ problem spending addictions.

  • If we are talking about alternatives to the horrible Robin Hood proposal, I haven’t seen better than Vince Cable’s pamphlet, ‘Tackling the fiscal crisis: A recovery plan for the UK’.

    http://www.reform.co.uk/Research/ResearchArticles/tabid/82/smid/378/ArticleID/950/reftab/56/Default.aspx

    Vince wrote: “The emphasis for fiscal consolidation must fall on controlling public spending, not higher taxes: to commit to additional tax revenue raising from the outset undermines any commitment to setting priorities in spending. This process will be painful and difficult. It will involve real cuts in many areas and will mean that the big budgets – health, welfare, defence and education – must be tackled. There should be no “ring fenced” areas of spending. Existing spending has to be justified, not simply assumed to be necessary and trimmed at the edges.”

    As we would expect from Dr. Cable, it is sound, practical, compassionate, and sensible. Which is why he’s our choice for Chancellor, rather than Richard Curtis.

  • Ah, I have been caught out with numbers of PhDs; 350 of them, in fact. However, it’s interesting to note what the letter says: ‘This tax is technically feasible. It is morally right.’ It doesn’t make any commitments about its avoidability, or whether it’ll be good for the economy. It’s a moral message rather than an economic one. As such, it would carry more weight if it came from 350 priests than 350 economists.

    As for alternative solutions, I favour a combination of cuts to social security payments (especially housing benefit; there’s nothing I loathe more than entitlement and anyone who’s canvassed a housing estate knows than entitlement isn’t the exclusive preserve of the rich), and new green taxes to properly cost the externalities of polluters. It may seem unfair that the poorest should bear the costs of the mistakes of the rich, but the poorest are the least likely to generate more wealth, and investing in them during a recession will only prolong it.

    It’s not fun, wondering how you’re going to afford your next meal – which I have done, from time to time – but the moral case behind the welfare state has been significantly weakened by non-stop tabloid coverage of benefits scroungers and others exploiting the system. They are of course a minority, but given that the welfare system seems unable to discriminate between them and cases of genuine need, throwing more money at it is unlikely to make the problem go away.

  • For example:
    http://www.telegraph.co.uk/news/uknews/5651825/Benefit-payouts-will-exceed-income-tax-revenue.html
    10% of the mooted revenue of the Robin Hood tax would be needed to cover the shortfall in benefit payments relative to income tax in this year alone.

  • There isn’t a necessary connection between the two, Geoff. Cutting housing benefit will lead to more overcrowding, certainly, but after talking to many young couples who got a flat on the social, had four kids and then demanded a council house to accomodate their choices, my sympathy for people living in overcrowded houses is limited to an ever-shrinking number of cases. I couldn’t afford to look after a child or have security of tenancy, but my taxes are paying for other people to be able to do so. I invite you to find the moral justification behind that.

    Moreover, the fact of the matter is that we can’t afford to not to cut social security benefits. If to meet the gap between benefit payments and income tax you’d need £25 billion in the UK alone, then even if the Robin Hood tax meets its goal it’d be swallowed up paying for the welfare states of the West, and any mooted potential redistribution to the third world would be lost. You can bet your bottom dollar that if politicians have to choose between famine relief in the third world and propping up the welfare state here, they’ll choose the latter – precisely because of voters saying, ‘Cutting housing benefit will make people homeless and destitute’.

    How do you plan to pay for an expanding welfare state, Geoff? This isn’t just pensions – the amount paid for social security benefits has consistently expanded over the last thirty years. At what point would you say we can’t afford to not make people homeless any more?

  • niggle-away 23rd Feb '10 - 5:19pm

    It seems to me that there are two broad responses to the deficit caused by the recession.

    1) There are those who see this as a golden opportunity to reduce the size of the state by cutting spending.

    2) Those who recognise the economic difficulties and the need to reduce the deficit when the time is right, but want to do what they can to preserve public services.

    If you take position 2 then it is right to examine tax rises as part of the solution. The advantage of the Robin Hood tax is that it’s an innovative new approach to raising substantial amounts. This is why the right wing/libertarian blogosphere is so opposed to it. A new source of tax is a strategic defeat for them.

    For others it should be judged as all tax issues should be:

    1) Who pays and how progressive is it?
    2) What other consequences will it have?
    3) How politically acceptable will it be?
    4) Is it technically sound?

    The Robin Hood Tax looks like it has a good chance of providing favourable answers to those. Its incidence will be wider than bankers and their bonuses, but transaction taxes starting as low as 5p in every £1000 is hardly going to bear down on the poor and modest earners. This is a progressive indirect tax.

    If it damps down speculative transfers as Tobin wanted then that will be a good thing too, though its backers seem more interested in raising funds.

    Polls show that it’s backed by the public. Indirect taxes are often politically more acceptable, but very unprogressive.

    EXperts say that computerised trading makes it easier to levy, and the 350 supporters include City types who understand the mechanics.

  • I think you’re being generous with your “two broad responses”. The Robin Hood proposal and its supporters seem to be more characteristic of the third response: people who never saw a tax they didn’t like, and think the financial/fiscal/deficit crisis represents a good opportunity to tighten the screws.

    As Tom Papworth mentions upthread, the history of this proposal makes it clear it’s really a policy looking for a justification and a PR opportunity, not a serious response to a policy problem.

  • Paul Pettinger 23rd Feb '10 - 6:46pm

    As my 19 century radcial Liberalism teaches me, tax should not fall on labour and (as in this case) trade, as they are productive. Instead the burden should go on unearned income and assets. I am all for redistribution, but a transaction tax seems an economically illiterate way to go about it.

  • I’m confused, is this free money or not?

  • Geoffrey, I’m not sure you understand how housing benefit works. Cutting housing benefit doesn’t impact on a local authority’s statutory duty to provide housing; it rather impacts on where less well-off people can afford to live by increasing the amount of rent they’ll be liable for. Therefore it reduces the number of properties available to the less well-off in high-rent areas, having the knock-on effect of reducing rent in those areas for the better-off. It’s certainly a policy which favours the middle classes over the poor, but doesn’t necessarily lead to destitution. It just means that people can’t necessarily live where they want to if they can’t afford to do so.

    I also note that you didn’t deal with my question. What do you do when the cost of social security exceeds tax reciepts, and you’re forced to run a constant deficit? One of the few things Gordon Brown has got right is his description of the cost of benefits as the cost of society’s failings; what do you do when the cost of those failings is no longer affordable?

  • This is decidedly not free money. I would recommend reading the Centre Forum Economist on this. He’s written a lot on it on his blog, but here’s one link http://freethinkingeconomist.com/2010/02/15/robin-hood-part-deux/

  • “But now we need to find a way to pay for restoring the public finances, as well as tackle the unfinished business of the Make Poverty History campaign (even the pledges on overseas aid made at the Gleneagles G8 have fallen $22 billion short) and make a start on the challenge that the Copenhagen climate conference failed to address. No opponent of the Robin Hood Tax has said how else those challenges can be met, but the answer is clear. Massive cuts to public services on the one hand, or huge increases in other taxes like VAT.”

    The best way to make poverty history is to not interfere in the markets and hamper economic growth. The massive reductions in poverty in India and China were not due to Make Poverty history campaigns. There is still a distance to go but it is further economic growth that will get them there, not the pious tossing them a few quid as a band aid. Overseas aid should be scrapped, it is not for the state to take money off people to give as charity, individuals should decide on their level of giving themselves (the only exception is emergency aid so that the international community can react quickly to events such as the Haiti earthquake.

    Still believe in Anthropogenic Global Warming after Climategate and all the other scandals of the last couple of months? You must be using it, as it always and only ever was, to further a political agenda.

    “Massive cuts to public services” Anyone who proposes this will get my vote if they are talking about stopping funding community organisations and ditching jobs like these:

    http://jobs.environmenteast.org.uk/?p=15

  • Some of the comments here are really quite frightening. I’m really uncomfortable with the impoverished thought and lack of humanity. Am I really reading these comments properly or am I not grasping what is going on? We’ll have slum ghettos full of kids with no shoes next!

  • I was meaning the destitution that would happen if the housing benefits were taken away.
    I’m glad I invested in one now and didnt bother having kids.

    To paint the poor so negatively is frankly appalling. The Royal Navy was sent up to patrol the waters around Liverpool for similar reasons! Have we learned nothing! George Square in Glasgow was given the alternative name of Red Square for a reason.

    I know professors, GPs, surgeons, company CEOs, cancer researchers, soldiers, sailors, police officers to the rank of inspector, pharmacists, oncologists, chemists, teachers, dentists, politicians, engineers, IT specialists, lawyers who have all been helped at one point or another by the benefit system and am convinced that none of them would have made of their lives what they have with out it. How many of our sick will be living in tents

    I have a niece and a brother who both served in the armed services. Both of them completed their contracts and both of them had difficulty in finding work. They both found work, given time, but were dependent on benefits. I wonder how easy that would have been for them with no housing benefit? And would they have regretted their decision to put their lives on the line for a country where the poor are held in so low a regard?

    How suitable would my brother have been judged for the police if he’d spent 3 months living in a homeless hostel or sleeping on a park bench? If we as a society expected that of him, what incentive would that have given him to continue putting his life on the line every day at work, often with unpaid overtime, handcuffing people we hope to never meet and living with a view of the world that would prevent most of us sleeping?

    With a baby now, if my niece lost her partner would we really put her and her baby in dorm, a unit for troublesome single mums or a slum? I’m pretty sure that would make her regret ever putting on her uniform and sailing off to war on our behalf. Would we have condemned her to remaining in the armed services fighting possibly another war and demanding she find a job because if not it is a park bench so best to sign up for more war at sea? No support for her for the two months she spent looking for work, and no strong laws to allow her to sue the first new employer who refused to pay the salary she earned? I’m not sure that would convince her still-serving friends they are on the right side. Are you?

    It’s all very well to throw ideas up for discussion; I loved doing that as a scientist. Never forget the numbers in text books are real people and if you want to drive down house prices, then there are ways to do it without destitution. New York has price controls, the great capitalist city took steps! You could simply wipe a couple of zeros from the value of every home in this country, you could build council houses.

    Anyone who wishes to talk about policy and being taken seriously has to make an effort to consider the consequences. I susepect that current science will soon show the act of removing benefits and the stress that will cause will have profound effects on long-term health, not only of the people who will become destitute, but on even those yet to be conceived. Evidence is accumulating and seems to confirm the theory that immense stress has profound long-term effects on human genes. Are you ready for the health bill? And are you ready to walk away from UN human rights law because councils will not and do not have the means to comply?

    One last thing, do you think it is a good idea to force people who happen to have lost their jobs to pack up and move elsewhere, away from their friends and neighbours, their support network, their communities? Pensioners won’t know their neighbours, they’ll move into single rooms and have to give away all their nick-nacks… And where will they go? I’ll tell you where. The slums, the slums we razed from this country. They are already appearing and they will grow.
    The poverty of thought….inflicted on the poor

  • And I’ve been in those hostels too. I went there with my mum to escape a murderous father. A roof made possible thanks to housing benefits. Without them she’d have stayed and we’d be dead too. We made out just in time.

    That situation will never happen to me again. But your proposals will leave others, living that life right now trapped. You make no provision for ensuring people have alternatives. Safe alternatives.

    If you want every person to pay their way then find a way of governing that means there are jobs, and jobs that pay a living wage for every adult. Has there ever been a time when there was no unemployment? Ever?

    What will you do Jock, chap on doors of housing benefit recipients and ask for volunteers who are willing to give it up? Or just cancel all payments and see what happens over the next few weeks?

    You’ll be left having to force people out on to the streets? Would that be the police, or a private agency or will you take it upon yourself to put your theory books down long enough to do the deed yourself? Politics is easy when you are sitting in the office giving orders. So often, those who govern don’t think they should do the actual work themselves. Will you? That’s politics – rolling your sleeves up taking action.

    A solution that creates a nightmare is a not a solution.

  • It gap from A to C is the problem I have, and you haven’t explained how that will be dealt with. Reduce housing costs by cutting benefits. Will rents drop over night? No there will be a time lag, and the destitution will appear in that lag. That’s my issue. I don’t see how removing that buffer of benefits will ensure that people are safe. And if your theories don’t give you the results you expect what will happen to the people living the lives and desperate to escape like my mother was?

    How long will that time lag be and what happens in the meantime? If you are going to ‘engineer a new society’ then like all engineers, you’ll need to know every step in the algorithm and be prepared for them. That’s why I ask you if you’ll do ask for volunteers or do the deed yourself? Far better to plan so no one needs to? I’ve no idea how anyone thinks that would work. That”s why I am asking.

    I’m well aware of the spiralling costs, the costs we can’t afford now or in the future. And people just like me are well aware of how much the rich don’t pay tax via evasion, avoidance, and how much welfare we give them. When I moved away from academia and into the world of business I was truly shocked at just how much money was handed over to businesses. Truly shocked. And angry at the huge waste I saw.

    How would you make it work? Do you really want to have tented cities for any length of time? If not how will you avoid it? All challenging questions that need thought and answered. I’ve not got them, it isn’t me who proposed it. So think about it and answer them if you can. If I didn’t want to hear your answers I wouldn’t ask.

    There will be just as many problems as wiping noughts off the end of property values, of land values or any other policy any of us dream up.

    I simply don’t think you have some kind of brief for the wealthy – I don’t understand how you are going to make it workable. Any engineer of any kind would have to explain how they are going to make their theory work. Politics the theories are no different. Explain it to me. What I think is you have a theory and haven’t thought it through fully. There’s a gap that has to be taken care of. If you don’t then I’m left to assume you are aware of it and are willing to smply resort to the Thatcher position of ‘unemployment is a price worth paying’.

  • I’ll not go on with any more questions Jock, not just yet: I’ve a ton.
    I don’t see myself as of one political colour or another, others can judge that. I like evidence and plans, thinking through the plans. Same goes for climbing the Cairngorms. All very well getting up to the top for some beautiful views, but when the wind changes, and the rain comes on suddenly, your view is thick cloud. Then it is no good thinking, ‘Darn, should’ve brought waterproofs!’

    Now. I’m going to go off and do mysyelf a thought experimet. Let’s see why the Kivu province of DRC is in such turmoil given it is essentially lawless. I wonder what services the locals in Bikuvu or Goma could provide in order that they may have anti-malarials…sewage, that their children can go to school and be children rather than lugging the jerry cans of water as they do etc or the Ghanians who suffer terrible burns in their straw houses. What could they do that would mean they wouldn’t need the training provided by Canniesburn Hospital surgeons? What would make them wish everyone Hakuna Mata each morning…

    If you influence power and decisions, I think I best be prepared!

  • Eh, there is no effective state machine of any description in Kivu.

    I’m struggling to think of a society in history that did not have warriors , so until I can think of one, I’ll use Kivu as my blank sheet of paper.

    You turf people out of their homes here, and we’ll have riots. If you’ve got no state, alliances will form not knitting circles and uncle George growing pea plants. That’s where my blank sheet of paper is taking me so far. Every thought at the ‘better’ things has a terrible ‘but’; greed, there is always a greedy person.

    Plenty of little villages got on quite well in Kivu for years. No effective state (not much in the way of healthcare or plumbing) but they got on with their lives just the same. And then an upstart arrives. Decides he’s in charge. That’s what happens in Kivu, over and over again. That’s what happens. Go and talk to the villagers who moved into towns. Let them tell you. They’ll tell you how their village was organised, how the most respected was the man who sorted quarrels, the diplomat, the organiser. And then the trouble arrives to take over, push the old man aside and help themselves. The country is beautiful, but be warned. What you’ll hear will break your heart. DRC has a history of institutions, many of which we’d recognise as Europeans, many we wouldn’t.

    Every little village in Europe, going way back too; he little communities around CAR too. There’s always someone who wants to be the boss, invited or otherwise. That’s where states come from. They begin as the organiser, the guy who manages the biggest herd or the biggest crop of whatever, then the organiser of the warriors.

    We have a very short history of institutions. We’ve had wars for centuries if not longer. It was St Columba who declared The Law of the Innocents in 697. He didn’t do that because humans on this island had a tradition of peace! The Vikings were hauling their victims off as slaves, the Romans decided to call it a day and build some walls and join them up in a long line instead.

    I’m surprised that people wouldn’t expect trouble without a state to enforce laws or rules of behaviour. We’re too much like chimpanzees in our behaviours and not quite so gentle as the loving bonobo. I thoroughly dislike it. I wish we were perfect, peace-loving primates. But we aren’t. There is always one or two who will enforce their dominance and then look to expand their area, their land, their resources. Chimps do it. Humans do it. I’d guess, mankind has probably been ‘lawless’ before we had farming, fighting one group against another over fruit trees and mates.

    I’m sure you’ve had these discussions with many people. I think I’ll end this one here for now.

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