Quote of the day

George Osborne:

\”The Commission itself points out that a European financial transaction tax would have a serious impact on European growth. It would hit the UK economy, it could reduce European GDP by up to 3.5pc. The Commission takes the central view it would only reduce European GDP by 1.76pc. That is their central estimate that is going to cost 500,000 jobs across the European continent. Those are not my figures, these are the commission’s figures. We have just spent the whole of rest of the morning about how we can get the European economy going, how we can create jobs, how we can make sure we are not priced out of the global economy and then we have discussion about a proposals that commission itself says is going to reduce growth and costs jobs.

\”We have to be realistic and truthful to our publics about who pays this tax. There is not a single banker in this world who is going to pay this tax. There are no banks who are going to pay this tax. The people who will pay this tax are pensioners, with pensions. They are taxpayers through their governments because they have to raise money on through sovereign debt auctions. This is not a tax that is paid for by bankers or banks. I am all in favour of taxes that are paid by bankers and banks that is why I have introduced a bank levy in the UK paid for by banks and their shareholders. A financial transaction tax is paid for by the end beneficiaries of financial transactions and that is pensioners. So if you want to go and introduce a big tax on pensioners that is the end result. But at least be honest about who pays this tax.

\”We are not being honest about the revenue that is supposed to come from this tax even if all the business didn’t leave the European continent and we were able to collect it. This money has been spent four times over by the people around this table. It is supposed to be contributing to the EU budget, which is the commission’s proposal. It is supposed be helping national government’s fill the hole in their public finances. The third use, is to spend the money on the aid commitments that some countries around this table have not delivered on. The fourth idea, is that it should be spent on climate change commitments. So the same money has been spent four times over.\”

Would any of those who support the Robin Hood Tax please like to coment?

Given that little Georgie has nailed most (but not all) of the reasons why it\’s a very bad tax indeed?

The two he\’s missed are that the tax will not reduce price volatility and it won\’t in fact raise any money. That 1.76% fall in GDP means that the losses of revenue from other taxes will be greater than the revenues raised by the tax itself.

And yes, the fall in revenue, the fall in GDP, does indeed make sense. The tax, just as with the IFS report into stamp duty, increases the cost of capital to companies. This is not a fall in, say, HFT, a supposedly \”wasteful\” activity that shouldn\’t be included in GDP. It is not a shrinking of the banking sector itself. This is purely and solely (as per the EU report) the effect of making capital more expensive for companies. As such it\’s actually an underestimate, for it has only been calculated against the cost of capital for large corporates.

So, anyone? Ritchie, the man who has written reports applauding the tax? Owen Tudor, head of the TUC campaign for it? The Robin Hood Tax guys? Oxfam?

In fact, any of the people who have been screaming for this tax: care to address this critique of it?

Or are we just going to get *crickets*?

One thing worth pointing out: sometimes, even Tories are correct. This is one of those times.

8 thoughts on “Quote of the day”

  1. I think the wall of text containing well-reasoned arguments was tl;dr.

    They prefer their economic arguments short, snappy and suitable to be scrawled on placards to be left next to their empty tents at St Paul’s.

  2. David,

    Possibly. There is always a time for an impassioned, coherent and comprehensive speech that we can point to though.

    Anyway: let’s get to work and condense that impassioned, coherent and comprehensive speech that we can point to into something you can write on cardboard and wave at people.

    How about:
    – I want to tax pensioners: I’m for the FTT!
    – I want to destroy 500,000 jobs: vote for the FTT!!
    – Problem: We’re collecting too much tax revenue. Solution: Introduce the FTT!!

    Or, to use the classic lefty tactic of playing the man, not the ball, how about:
    – The EU commission wants the FTT: what could possibly go wrong?

  3. OK, in which case anybody can argue that his source of income shouldn’t be taxed because it’s always “savers and pensioners, starving orphans and widows etc” who will suffer.

    On the practicalities, the FTT is a terrible idea, because transaction taxes always are. Far better is the bank asset tax (or bank liabilities tax, comes to the same thing mathematically), that doesn’t change interest rates paid to or earned by non-bankers, it just reduces the volume of credit to the optimum level (i.e. the Laffer maximising tax point = the point at which there is the optimum amount of credit) and of course, stops the bankers collecting the rent that arises from banking activities, i.e. the 2% mark up they can earn in their sleep.

  4. Is it too much to hope for an answer from theat well known economist, His Grace the Archbishop of Canterbury….?

  5. Jonathan,

    Ooh, I missed the GMB attack on Osborne. But given that they don’t really have an answer to his criticisms of the FTT , it’s not surprising if they resort to personal attack. ‘Twas ever thus when people are losing an argument….


    Agree with you about the bank asset tax. Much better idea.

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