For immediate release:
David Hillman, spokesperson for the Robin Hood Tax campaign, said:
“Cameron is guilty of using dodgy statistics and bad economics to justify his opposition to an FTT that would ensure the City pays to repair the damage it has caused.
“Cameron has confused the interests of the Square Mile with the interests of Britain as a whole and is turning down billions that could protect schools, hospitals and jobs.”
The European Commission has explicitly stated it does not agree with many of the assertions made by Cameron – an FAQ dispels some of the main myth below.
Dispelling Cameron’s FTT myths:
Will an FTT negatively impact on growth?
The European Commission has denied Cameron and Osborne’s assertions. Their impact assessment, cited by Cameron, does not take into account the positives – that an FTT would raise billions in revenue that could bolster growth. Further, it would stabilise markets by deflating the recent boom in areas of high-frequency trading, helping to rebalance finance in favour of the real economy. The EC’s impact assessment was based on extremely poor economic modelling and the EC Tax Commissioner himself – Algirdas Semeta – has said they are in the process of remodelling it’s impact to give a more accurate picture.
The biggest threat to long term growth is not an FTT, but an out of control financial sector. The Bank of England found the cost of the financial crisis to the UK economy over time will be at least £1.8 trillion and could be as much as £7.4 trillion.
The UK is cynically arguing that an FTT could hit growth, but has chosen to implement other taxes such as VAT which impact negatively on growth and hit the poor harder.
Will an FTT hit jobs?
The figure quoted by Cameron and others that 500,000 jobs will be lost as a result of an FTT is outlandish. The European Commission (which Cameron cited as his source) has directly contradicted this, saying “the negative employment effect should be limited, and presumably mainly be located in the investment banking arm of the sector, while the retail-banking arm should not be affected at all”.
The vast majority of the 1.2 million people employed in the financial sector have nothing to do with casino investment banking and would not be affected by an FTT. Investment and human resources that are currently deployed in casino banking could be used more productively in the real economy.
And as the European Commission has also pointed out, billions in increased Government revenue from an FTT would also help stimulate labour market growth.
Will FTTs lead to a 90% loss of some trades?
It is true that an FTT will impact on fast money casino banking more – including High Frequency Trading of derivatives – we say this is no bad thing – since this area of the market helped destabilise the wider economy and adds little of any real ‘value’ (Chairman of the Financial Services Authority Adair Turner, called such areas ’socially useless’).
Cameron, the British Bankers’ Association and others say that the EC ‘estimates’ show derivative volumes will fall 70% to 90% as a result of an FTT. This is in fact an assumption that they feed into their model rather than a ‘finding’ from the model. So it’s not clear it should be given the same weight. The rate proposed for derivatives is smaller than for stocks, precisely because derivatives are used for hedging. Genuine hedgers, using the contracts to manage risk, will not be buying and selling them every seven seconds. A charge of 0.01% is unlikely to deter genuine risk management.
Will an FTT cause business to relocate? Does an FTT need to be global to work?
The Government’s position that it needs to be global to work is at best disingenuous. Evidence this is not the case exists right here in the UK. Our unilateral FTT on shares raises more than £3billion for the Exchequer each year without a significant loss of business from the UK.
In fact, more 40 countries have implemented FTTs and as the IMF have said FTTs “do not automatically drive out financial activity to an unacceptable extent”.
As has been clearly outlined by European Finance Ministers, it does not matter where the transactions take place, but which parties are involved, making avoidance harder – this is the so called “residence principle”.
Contacts:
Simon Chouffot: 07725 879 580 simon@robinhoodtax.org.uk
Jon Slater: 07876 476 403 jslater@oxfam.org.uk
Notes to editors:
The Robin Hood Tax campaign is a coalition of 115 UK organisations including Barnardo’s, Comic Relief, Oxfam, Friends of the Earth, Stamp Out Poverty and the TUC:www.robinhoodtax.org.uk
The campaign has 250,000 supporters and we are endorsed by over 1,000 economists and politicians from all main political parties.
We are calling for new financial sector taxes to help tackle poverty and climate change, at home and abroad
