Political Updates on the Robin Hood Tax
This update come to us from OxfamGB, offering comprehensive political updates on the Robin Hood Tax and an outlook for 2012. Includes updates from Europe and the US, what lies ahead, what we can do and more!
An FTT is closer than ever to happening. France and Germany have resolved to fast-track implementation of a Financial Transaction Tax in 2012. Italy is now in support and the large majority of European countries. FTT is a key issue for Merkel and Sarkozy – they are expending political capital to drive forward
Both Merkel and Sarkozy have publicly endorsed the use of FTT revenues in part to finance development and climate finance.
Neither Merkel nor Sarkozy support the use of revenues to finance the European Commission budget. The proposal is that FTT revenues will be raised nationally and spent at the discretion of each government.
UK, Sweden and handful of others are blocking meaning EU-27 agreement not going to happen. Most likely route is for Eurozone, or Eurozone Plus to agree an FTT. This would mean revenue is collected nationally by participating countries and would not go to Brussels.
In the UK the coalition Government has toughened its stance against FTT and this unlikely to renege in short term, though public anger remains high as banks return to business as usual. The full weight of the financial lobby is being deployed to denigrate the tax and to falsely link it to financing ‘Brussels bureaucrats’.
Momentum must be sustained from major successes at G20 that included Bill Gates backing an FTT and a new coalition of the willing emerged that includes Brazil and South Africa for the first time alongside Argentina, France, Germany, Spain, the European Commission and others.
The US is softening its stance thanks to Occupy protests, FTT campaigning and looming election, creating opportunities on both sides of the Atlantic.
New Year Starts with a Bang for FTT
Following some stiffening of resolve by Nicolas Sarkozy and Angela Merkel over the Christmas period they indicated they want to speed up implementation FTT plans - crucially saying that an FTT is possible between Eurozone countries, without waiting for full EU-27 agreement.
Both leaders have made clear that banks helped cause this economic disaster and must shoulder their fair share of the recovery costs. Both have indicated a proportion of the revenue could be used to tackle poverty and climate change.
Germany's Finance Minister Wolfang Schauble has written Euro 2 billion of FTT revenue into the 2013 budget and is one of the FTTs strongest proponents, saying in an interview:
"I don't want to wait until such a tax is introduced worldwide. Otherwise we would risk not only the stability of our financial markets... but we would also be endangering the legitimacy in the public eye for the entire system.
"That's why I'm fighting with such determination for a financial transaction tax... I'm very much in favour of Europe leading the way”.
With an election in France this May, Sarkozy knows this tax is popular with voters across the political spectrum and has made it one of of his top three re-election priorities, even indicating that France may go it alone.
Italy has also for the first time backed the FTT(Mario Monti, in fact used to study under James Tobin), meaning apart from the UK there is agreement amongst Europe's biggest economies. At the same time the new Spanish government has reiterated Spain’s support for an FTT. Norway has said it would join a European FTT, and would spend the money on development and climate change.
The link to Development and Climate Change made by Merkel and Sarkozy
Crucially for the Robin Hood Tax campaign, both France and Germany have explicitly made the link that revenue from an FTT should, in part, be used also to tackling poverty and climate change. France has long since advocated for this and have driven the agenda forward at the G20 (see below). Sarkozy said in his final G20 speech:
“France considers that a share, to be defined as - sizeable, majority or total - of the proceeds of the FTT must go to development.”
Merkel, in a statement to the Development Committee of the Bundestag in November last year backed part of the revenues from a financial transaction tax being used to tackle development and climate change, stating that
"One could discuss the use of a part of the revenues from the Financial Transaction Tax for development and climate adjustment."
Much more needs to be done to solidify the German commitment to spending the revenues on development and climate change, but getting Merkel on the record in this way is a great step forward as she had not said this publicly since the G20 in Pittsburgh in 2009.
Untangling a European FTT
In September 2011, the European Commission backed the FTT – releasing a draft directive that elaborated important technical and legal aspects of a European-level FTT. But it was a double-edged sword - poor economic modelling wrongly concluded jobs and GDP would be hit and gave our detractors useful ammunition.
Much was also made of the suggestion that revenue be used to fund the EC's own budget. Thankfully, this does not have political support – not from France, not from Germany, nor from anyone outside the EC itself and is very unlikely to proceed.
Similarly, a full EU-27 FTT agreement has also effectively been closed down in the short term following the UK dramatically wielding its veto at the EU Summit in December, and Sweden's continued opposition.
By far the most likely option is that the Eurozone or a larger coalition of willing countries will implement an FTT on their own. This can either happen through 'enhanced co-operation' – the slow route, whereby countries reject the EC proposal and forge a new agreement within the EU framework. Or more likely still, the quicker route - an intergovernmental agreement between a group of committed countries who simply plough ahead. France and Germany will be releasing details of their own proposal on 23 January but it's already clear that revenue would be collected nationally by participating Governments.
So what support is there? French Minister for European Affairs Jean Leonetti indicated that 25 of 27 EU member states are in support, though it seems more likely that the UK, Sweden, Netherlands, Denmark are all against and some countries, such as Ireland and Italy, want to see a full EU-27 tax only.
A crucial battle for Germany and France is to persuade sceptical members of the single currency (such as Italy and Netherlands) that a Eurozone of Eurozone Plus FTT is workable.
The G20 Context
Perhaps the greatest moment for the RHT campaign in 2011 was the November G20 in Cannes. The Vatican and Archbishop of Canterbury had both come out in support and Bill Gates backed an FTT, telling G20 leaders it was feasible, could raise $48 billion a year and emphatically making the link to proceeds being used to tackle development and climate change.
The idea struck a chord with the public and a groundswell of popular support ensured us coverage around the globe. France, who had been spearheading the initiative during its Presidency of the G20 was able to announce that a coalition of the willing had emerged that included for the first time South Africa and Brazil alongside Argentina, France, Germany, Spain, European Commission, African Union, Secretary General of UN and others.
The G20 Presidency is now held by Mexico who are against an FTT, though they are keen to find new resources forthe Green Fund which was agreed at their COP in Cancun. Sarkozy indicated in his final G20 speech that the FTT focus is likely to shift to Europe, at least in the short term, and it is unclear to what extent France will continue to champion the cause in the G20 context.
Opportunities still exist however – South Korea has the potential to come out in support, the US may soften its stance (see below) and the G20 continues to give an important platform for developing countries and others to link FTT revenue to development and climate change. Brazil is also an FTT supporter and is hosting the Rio Earth Summit immediately after the Mexico G20.
The Exceptional Case of the UK
We have taken a substantial step backwards in the UK. The Government has swapped its rhetorical emphasis that they support an FTT at the global level, for outright hostility - George Osborne claiming that it would both be paid by pensioners and destroy the City of London and Cameron dramatically wielding his veto in Europe to 'safeguard' the City and block attempts to implement an FTT.
Coalition partners the Liberal Democrats are towing the Government line and even Labour in opposition are not prepared to put their heads above the parapet for a European or Eurozone Plus FTT.
This partly reflects the growing intensity of financial sector lobby and a timidity to take on the City. Groups such as the Adam Smith Institute, British Bankers Association and Confederation of Business Industries having released a slew of anti-FTT reports (their hyperbole increasing proportional to the chances of an FTT happening).
It also partly reflects the muddying of the waters, with certain sectors of the press portraying the proposal as a Brussels tax - see for example Daily Express' front page: ‘Fury at new EU tax on Britain’. It is interesting to ask who the UK public hate more, Brussels or Bankers- a close call.
In short, we are unlikely to see the UK shift its position any time soon. Yet much anger towards the banks still exists and the campaign continues to enjoy a high profile. With the Government having so clearly let the financial sector off the hook and the controversial bank bonus season about to kick off, with industry predictions saying our top five banks will enjoy profit rises of 15% to £35 billion this year, it is unclear whether the Government's bullishness can continue. Certainly, the current shift in national narrative to responsible capitalism, and a softening of the US's stance (see below), could help unlock Labour's support. The point has not been lost on many that what is being defended is not British interests but class interests.
If a Eurozone FTT is implemented without the UK it will create an interesting scenario whereby many trades in London will still involve European counterparties, meaning the Government would be forced to repatriate revenue back to participating countries – why block a tax that is anyway happening here and could raise billions for the UK?
The Special Case of the US
Whilst Obama has historically been supportive of an FTT (one report suggesting he told his economic advisers: ‘we are going to do this!’), plans were put on ice. At the G20 in November however a considerable thawing took place – Sarkozy announced that the US was 'open' to the idea - reflecting a change in both domestic and international politics for the US.
The Occupy Wall Street movement, the National Nurses Union and other groups have massively raised the profile of the FTT and financial sector justice in the US, with many articles appearing in the New York Times, Wall Street Journal and others. Whilst movement in the US on the FTT is very unlikely, with elections fast approaching and a concerted public campaign, we could see a further thawing of the US position on taxing the financial sector, potentially unlocking more support from around the globe.
COP 17 - Durban
More progress was seen on the FTT at COP 17 climate talks in Durban, South Africa (28 November – 9 December). The FTT received a lot of press coverage and Kofi Annan and influential targets within South Africa such as Trevor Manuel (member of the South African government and former Finance Minister), made clear their support on the FTT.
All to play for in next 3 months
The debate over FTT feasibility will rage on, but 2012 will be characterised by some big political decisions on the FTT.
The FTT is closer than ever to becoming a reality and we should take heart from European attempts to speed up the timetable for implementation.
Without campaigning from organisations like the Robin Hood Tax, it is quite likely we will see an FTT agreed by the end of 2012 but without any clear commitments to development and climate change. The door has been left open to ensure revenue is at least in part earmarked for the causes we care about. It is crucial that we do not let up the accelerator in the coming months.
Sarzkozy and Merkel will release details of their FTT proposals on 23 January, they want agreement to be reached by March – this sets a fast pace to the campaign for the start of the year.
What needs to be done?
There is a need to counter the powerful and growing anti-FTT lobby and de-couple Merkozy's proposals from the now outdated 'Brussels tax' rhetoric. We must re-establish that the FTT would be good for the financial sector and good for society at large.
We must keep up the pressure on Sarkozy and Merkel to re-assert that revenue should go to development and climate change. There is a need for all to use high level meetings such as G20, Rio +2020, COP to have strong message on development and climate change.
Key countries such as Italy and Spain who are in support must be won over to the idea of a Eurozone or Eurozone Plus tax that negates the need for EU-27 wide agreement.
Keep on pressure on the UK to ensure they at least do not oppose and convince the Labour Party to be in favour of the European option
Convert the growing momentum in the US into clear change of position for the Obama administration as it goes into the election period.