8 Progressive Moves of the Coalition Government

I’m not exactly a fan of the last government, but given that I indulge in a lot of Tory-bashing and yet complain about excessive partisanship in British and American politics, I felt this list would be a testing and productive experiment to engage in. It is easy enough to pay lip service to the concept of rising above tribal politics but that depends on being able to evaluate the positions of your opponents on their merits. And in my own case, where I have less common ground with the Conservatives and Liberal Democrats than even many in my own party, it can be more difficult.

1.The introduction of same-sex marriage. Few people would have expected it to be a Conservative-led government to be the one to introduce same-sex marriage: indeed David Cameron took a big political risk in forcing the policy past the opposition of the majority of his own backbenchers. But now the exclusion of same-sex couples from marriage is a practice that has been buried in the history books. It is heartening to see the fight for equal marriage being won even in the more conservative parts of the Western world.

2. Referendum on electoral reform. It is already half-forgotten about, and those who do remember are largely constitutional reformers bitter about it being turned into a vote on Nick Clegg. But after a century of debate coming to nothing- despite New Labour’s supposed commitment to replacing First Past The Post- the people got their first chance in British history to decide how to elect their representatives.

3. The pupil premium. The case for providing extra funding that ‘follows’ state school pupils from disadvantaged background is overwhelming. There is so much evidence that shows such children are more likely to need and benefit from various forms of extra support that schools simply cannot provide without additional resources. I do believe the last government cared about improving educational opportunities for children. It was this vigourous enthusiasm that led to them floating daft ideas like evening classes for pupils on free school meals. (This struck me as punishing children with extra work just for being poor!) Sadly the government chose to scrap the Education Maintenance Allowance, which has rendered sixth form education nonviable for thousands of those very same students.

4. Universal Free School Meals for under 7s. There were so many obvious benefits to this policy that I outlined in this article at the time.

5. Rationalisation of Stamp Duty. The Chancellor has certainly made his mark on the tax system. One of the few improvements he made was the recent transformation of Stamp Duty that has been needed ever since house prices went crazy in the early 2000s. As well as quietly raising rates on expensive houses acquired by non-UK residents, Osborne did away with the ‘block’ rates. Previously someone buying a £249,999 house would pay 1% duty on the entire value, while a £250,000 house would attract a 3% tax also on the entire value. I am glad to see the back of this absurd structure in favour of income-tax style phased bands. It would be even better to go further and scrap Stamp Duty altogether on the primary residence in favour of imposing Capital Gains Tax. Would that not represent a move from taxing home ownership to taxing unearned rises in house values?

6. Meeting International Development budget target of 0.7% of GDP. It might not be popular, but the desperate poverty that exists in the world doesn’t go away because the nation’s finances need repairing. Our obligation as one of the richest countries in the world to help is not a luxury spending item we can discard, so I applaud the principled position to protect the Department for International Development’s budget from spending cuts.

7. Accepting Parliament’s opposition to intervention in Syria. Although the Prime Minister did not actually have to seek Parliament’s consent for his proposed military actions, he made constitutional history by doing so. It is to his credit that he did so and to Ed Miliband’s credit that he decided to join the opposition to war, thus defeating the government.

8. Cabinet appointments made for the long term. Gone are the days of the Cabinet musical chairs that Blair used to maintain a vice-like grip on his government. Where previously a minister could not be certain of remaining in post for much longer that 6 months, Cameron seemed to prefer stability and allowing ministers time to see their own policies to fruition. Most key people remained in position for four years of the Coalition, while the Chancellor, Home Secretary and Work and Pensions Secretary, Deputy Prime Minister and Business Secretary all remained for the full term.

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Momentum Gathers Behind Citizen’s Income Policy

When Governments across the world are broke, and public hatred of the unemployed remains high, it seems like an odd time to float the idea of a Citizen’s Income. Yet the policy of the state paying a basic income to every citizen has become more popular than ever. Switzerland will hold a referendum on the policy this year; a citizens’ initiative is being held to force the EU to consider it; and the resurgent Green Party of England and Wales has adopted the idea as its flagship manifesto offering. The latter is particularly exciting, as the Greens are poised to eclipse the Liberal Democrats as the fourth most popular party in Britain.

But isn’t “paying for people just for being alive” (as critics brand the policy) an economic impossibility? How could the state afford to dish out £3,600 per year, the current level of Income Support benefit, to every citizen? Is a citizen’s income just a far-left daydream?

In Switzerland, economists and politicians agree that that a Citizen’s Income is viable. They only argue as to whether it is desirable, often on the grounds that people should not ‘get something for nothing’. I think that drawing profits from speculation in property, currency and shares might also be described as getting something for nothing, but that doesn’t seem to concern these people. And in any case, a Citizen’s Income is also useful in that it can drastically reduce the size of the welfare state: unemployment benefit, child benefit, the basic state pension, child benefit, student loans, and income support can all be reduced or abolished altogether, something many right-wingers have been dreaming about since the welfare state came into existence. Overall, a Citizen’s Income would render £171 billion worth of benefits and administration unnecessary, reducing the welfare state to as little as 30% of its current size.

In order to calculate the costs of a Citizen’s Income, its UK supporters have proposed the following rates:

  • £56.25 per week for under 18s. This would be paid to parents instead of Child Benefit and Child Tax Credit.
  • £56.25 per week for 18-24 year olds. This is equivalent to the ‘youth rates’ of key benefits like JSA.
  • £71.00 per week for 25-65 year olds, equivalent to standard rates of JSA and Income Support.
  • £142.00 per week for the over 65s, identical to the flat rate state pension that is being introduced anyway.

Together with £3 billion a year for running costs and administration, the total costs would be £261 billion- a net cost of just £90 billion per year.

OK, there’s no ‘just’ about £90 billion, but it is a surprisingly low figure given how ambitious the scheme is. That money could then be found with surprising ease: by abolishing the Personal Allowance and 0% National Insurance bands altogether, meaning that workers would pay normal tax rates from the very first pound they earned. Ordinarily, that would be a hugely regressive move: the Personal Allowance exists to mitigate the benefits trap. As means-tested benefits are withdrawn quite sharply as one’s earnings increase, it has been known for some people to be better off on benefits than working with a low income and benefits ‘top up’. By removing taxes on very low wages, and now with the ‘Universal Credit’ policymakers have aimed to make it worthwhile to work on very low wages. They have had very limited success.

https://i2.wp.com/static.guim.co.uk/sys-images/Guardian/Pix/pictures/2013/7/3/1372850773508/unicreditgraph1.jpg

Source: the Guardian

However, Citizen’s Income would immediately solve the benefits trap by ensuring that every extra pound earned through work would translate into 68p (after Income Tax and NI) in a worker’s pocket, as Citizen’s Income is not means tested. This also means that part-time work becomes a viable option for those who want it. Thus the Citizen’s Income empowers people to shape their careers around their needs, not those of a complex and often self-contradictory benefits system.

It has been argued that this financial freedom could be abused. Why would people work if they could live off the Citizen’s Income, which won’t be withdrawn for failure to find work? Won’t it be a magnet for immigrants? To the first, I would answer that it would be tough to survive on £71 per week in the long-run, as any JSA claimant could testify. True, there would be some who decide not to work, but they would not have a comfortable existence. And as previously explained, it would always be worthwhile to work: in a region of rural India where a Citizen’s Income was trialed: the employment rate actually rose. Also, a top-up unemployment benefit could be introduced to reward the unemployed who are seeking work. To the second, it should be noted that those supposed ‘benefits tourists’ with the determination to milk the system can do so already. All these tabloid reports of benefits tourists aren’t describing migrants sleeping on the street and being denied access to existing benefits! In any case, payment of the Citizen’s Income could, as the name suggests, be made conditional on British citizenship.

The Citizen’s Income is a revenue-neutral idea that could provide a substantial boost to low earners and sure up support for a welfare system based on solidarity and universality. The only barriers to its introduction are political, and not necessarily from right-wing opposition. Alaska, hardly a beacon of socialism, already operates a limited Citizen’s Dividend of around $1,000 per person per year from its sovereign wealth fund. All that would actually be needed to make the policy a reality is the opening of people’s minds.

For further reading, please see the Citizen’s Income Trust 2013 report. American readers may be interested in the Basic Income Guarantee Network.

A Wealth Tax in the UK?

Today, income inequality is so extreme that the interest alone on the accumulated wealth of the richest few exceeds the growth of many economies in which they live. In other words, by owning so much already, the rich are now absorbing all of the growth generated by many of the world’s leading economies, and more. It’s not even a case of active exploitation any more: the only way a multimillionaire could avoid perpetuating her/his build up of wealth is to stick her/his millions under a mattress. Or deposit it in Barclays. This is why economies with apparently healthy GDP figures, like the UK and US, are delivering rising living standards only to a tiny minority.

The Simpson’s Mr Burns on wealth inequality

Logically speaking, the only way to end this spiral into virtual feudalism is to redistribute not only income (as inequality of wealth is now so great) but also wealth too. That was relatively easy from the 1940s to the 1970s. But in today’s globalised society, wealth redistribution through the tax system- when capital is highly mobile and capable of skipping between competing tax regimes- is easier said than done. It’s not even easily said when the majority of politicians (but fewer and fewer economists) are attempting to ignore the issue.

The Green Party has proposed that Britain follow France, Norway and the Netherlands, and introduce its first tax on accumulated wealth, rather than income. The “Wealth” or “Solidarity” Tax would apply to all British residents with assets (of any kind) worth £3 million or more. The rate would vary (it would presumably be banded) between 1% and 2% per year. Green Party policymakers estimate revenues of £21.5 billion and £43 billion- greater than the entire transport and defence budgets respectively.

I think the idea deserves consideration, even if a 2% wealth tax is quite steep for a medium-sized economy to pursue without international co-ordination. Although I don’t hold with the notion that tax rates must fall through the floor or the wealthy and talented will leave the country, there are limits to practicable tax rates. Without exchange controls or an internationally co-ordinated wealth tax rate, we’ll find that there would be little wealth left in the UK to be taxed at 2%.

Not that a wealth tax itself is an impossibility. The Netherlands, for example, has a marginal top rate of Income Tax of 52% and levies a wealth tax of 1.2% on all investments above €21,400. While this is quite heavy, the Netherlands is seen as one of the most “business friendly” (a phrase which is often code for “anti-worker” and “pro-inequality”) economies on Earth. Assuming that Britain could raise even £10 billion a year with a similar rate, one in eight pounds of planned spending cuts could be cancelled altogether.

Not that the policy has any significant prospect of fruition. The most influence the Greens could yield in the next parliament is as a band of two or three MPs negotiating with a minority Labour government. The list of policy concessions made by Labour would not be long.

#RR Offers a Fair Approach to JSA

Rachel Reeves (RR), who was promoted to Shadow Work and Pensions Secretary last Autumn, recently unnerved the left- that is, the real left- with an interview in which her tone on benefits claimants seemed a little too Tory. Her predecessor, Liam Byrne, was all too willing to jump on the benefits bashing bandwagon that has soured public opinion on the welfare system that any Brit might need one day. I am delighted to say that Reeves has now presented a coherent and broadly fair policy on social security.

RR (I’m hoping this will catch on as much as IDS, her opposite number) intends to do away with the American-style workfare and replace it with a two pronged system: the previously outlined Jobs Guarantee and a skills test for all new Job Seeker’s Allowance claimants. The latter would test job seeker’s english, maths and IT skills. Those whose skills are not sufficient for today’s employment market will be given free training. Importantly, skilled job seekers (yes, they do exist. Policymakers forget that too often) will not be forced into inappropriate training or workfare, unlike IDS’s system. But it’s worth noting that the test will help migrants who speak limited English and the poor or older people who haven’t used computers before.

Also, a contributory element would be restored so that unemployment benefits are boosted according to people’s National Insurance contributions. I’m broadly supportive of the aim: as in continental Europe, we would recognise that the contentious worker who falls on hard times after 20 years of work deserves a greater payment than the migrant who hasn’t paid a penny in UK tax. But, as others have pointed out, people should not be discriminated against because they were stay at home parents, or have just left school and haven’t had a chance to work yet. I hope RR has a solution: my suggestion is that in such circumstances, people are assumed to have a certain number of years of NI payments under their belt. I don’t write Labour policy though, unfortunately, so it is down to RR to close these gaps.

Yet it’s not just the policy that Labour is improving: it’s the thinking. RR has said that we must challenge falsehoods that have become prevalent in discussion on the welfare state. For example, many people supported by the state are also in work: there is no great divide. In any case, RR has also been bold enough to point out that being out of work does not constitute laziness. Thank goodness that somebody in politics is realising this.

There might be some hope for Britain’s social security system after all.

Yes, The Poor Should Pay Tax

Nick Clegg addresses the Conference Rally in B...

 

The signature policy of the Liberal Democrats in the Coalition government is a failed attempt at electoral reform the raising of the Personal Allowance  to £10,000. In other words, nobody is taxed on the first £10,000 of their earnings. Though this is a very progressive measure, rises in the Personal Allowance have been used by the Blair, Brown and Cameron governments as a means of artificially supporting those whose wages they have allowed to whither to the pitifully low level of the minimum wage.

 

As Nick Clegg has just called for a further rise in the tax free allowance to £10,500, I have been prompted to question the benefits of lifting the poor out of direct taxation altogether, as is his policy. Of course the well-off should bear the greatest burden of taxation: I support the re-introduction of a 50p tax band on incomes over £100,000 per year. I am proud that Britain can higher public spending than the US and still have lower levels of income and payroll taxes for most workers. However, I think its important that even the poor make a token contribution to the tax system so that they are true ‘stakeholders’ in the government, even if tax credits more than offset their tax bills. Elements of the right-wing press, already making dark implications about the value of the opinions of the unemployed, so how long until minimum wage workers are similarly ignored? The Conservatives are unlikely to support the policy unless there is political capital in it.

 

A much fairer policy would be to reduce indirect taxation, the most regressive taxes that there could possibly be. In particular, Value Added Tax (currently at 20%) is ripe for a reduction which would ease living costs, inflation and boost economic demand. It would benefit everyone, including the unemployed and very low earners who do not benefit from any rises in the Personal Allowance. Alternatively, Labour’s policy of a 10p tax band would be progressive but also give all workers the responsibility to contribute.

 

Moreover, I’m surprised that Mr Clegg believes that there is sufficient money available to the Government to provide what is a £100 tax cut to 24,000,000 people when we have a budget deficit to eliminate (and the Chancellor last week hinted that he realises that this proccess will in fact last until 2020, as people including Ed Balls- and me!- have said since three years ago) and shameful public spending cuts leading to an upsurge in homelessness and poverty, to name just some of the social problems that are exploding in Austerity Britain. Is giving the top three quarters of workers £1.96 a week really worth it when we could plough billions back into our beleaguered public services instead?

 

Don’t be fooled by the Personal Allowance changes: they merely amount to robbing Peter the broke pensioner to pay Paul the squeezed shop assistant.

 

 

 

Wow! A Fair Change to Welfare*

*Almost.

Like the majority of people I know, I always open the newspaper with a sense of foreboding. What has the Coalition messed up today? And the chances are that another employer has folded, the environment is enduring worse damage, and there’s another war going on somewhere. However, I’m generally not one for becoming depressed at the state of the world, as there is a lot of good news that we don’t talk about so much. And occasionally, even the Conservative Party will draw up a policy that is borderline acceptable. Knowing how to react to this is, as I’m sure you’ll appreciate, difficult for me. I shall explain what has happened.

The old age pension is the oldest and second most important component of the welfare state, after the National Health Service. Contrary to scare stories which I gather are spread liberally over in the United States, both work. Admittedly, the state pension is horribly modest, but with top-up benefits in place we can guarantee a basic income for the elderly. The concept behind it is sound: the more years’ National Insurance (usually equivalent to an 11% income tax) you pay, the larger the pension you receive in retirement. Employers are required to make similar contributions, with the result that the Treasury has a large fund which part funds the support in place for anybody who has contributed over their working life.

The trouble is, the state pension goes to people who haven’t contributed. I’m not talking about those who’ve had their National Insurance contributions made for them, such as the disabled: I’ll leave it to a nasty tabloid rag to make snide implications. I’m not even talking about the small group of immigrants who sometimes milk the system (reports of which are hideously exaggerated, by the way). No, I’m talking about the families in which a British expat automatically entitles their foreign national spouse to an allowance of up to £66 per week based solely on the expat’s NI contributions.

In effect, people who have never so much as set foot on UK soil, let alone pay anything in National Insurance, are able to claim £3432 a year. That’s not huge. But it does add up to as much as £400 million per annum at a national level, which is over half the cost of fraud in the pensions budget. The upcoming Queen’s Speech features a measure to redefine state pension criteria, so that payouts will be based only on the NI contributions of the claimant. The move can only affect new claimants, and will affect many more UK-domiciled couples than one would expect if we listened to the Government’s rhetoric. I have only one issue with this: women are likely to disappointed as they are more likely to take time off work to care for young children or disabled relatives, and will therefore not pay NI in those years.

It’s unfortunate that our society hasn’t developed to the point that stay-at-home dads aren’t a rarity, but we have to base the system on social reality. The solution lies in the existing system of National Insurance credits, where the state ‘pays’ an individual’s contributions on their behalf. There’d be nothing to worry about were the Conservatives not itching to reduce these…

Cyprus Calling

Map of Cyprus with EU flag

(Photo credit: Wikipedia)

On Saturday the 16th of March, the European Union and the government of Cyprus (that is, the internationally recognised state which covers the southern half of the island) quietly agreed the terms for a €10,000,000,000 bail-out for the debt-laden island. Quietly, that is, for the rest of the world. The people of Cyprus are outraged at the most draconian austerity plans ever seen in peacetime history. For it is not only the traditional pattern of regressive tax rises, public sector layoffs, and undemocratic privatisation that the islanders will be forced to accept,  but an unprecendented direct levy on all savings held in Cypriot banks.

Within hours, EU officials (notably, not the Cypriot government itself) announced that the first  €100,000 of deposits held by individual has been taxed at 6.75%, rising to 9.9% on savings above that level. Though this has raised  €6,000,000,000 for the Cypriot government, the indirect costs this precedent  will have dwarf any ‘benefit’. Within minutes, queues were forming at bank counters and ATMs, despite the futility of withdrawing cash from accounts in attempting to avoid the tax- as with all emergency moves like these, all means of avoiding it are blocked. In this case, banks were told to pay out no more than the 90.1% net balance of people’s accounts. Nevertheless, the queues continued to grow.

Cyprus has just raised the equivalent of one-quarter of its GDP, and this will be valuable in meeting its liabilities to foreign investors. Unfortunately this means that any country in the EU which is having financial problems is likely to face a run on its banks, caused initially by fears of a tax but then becoming self-sustaining, even if there was a chance of avoiding emergency assistance. The world has just witnessed a tragic and short-sighted undermining of confidence in the safety of retail savings.

Some on the radical left have commented that, though taxing pensioners on their modest care home fund is appalling, the principle of a one-time levy on the assets of the super-rich should be welcomed. To quote Peter Mannion (the cynical Cabinet minister from the popular satire The Thick of It), it is a “political merengue: sweet, but without much real world substance”. Trust that money in the bank is as safe as cash in the hand is crucial to supporting the bread and butter finance which keeps the global economy functioning.

The implications of this levy will not appear to be a significant problem today, but it is only a matter of time until they come back to haunt Europe. And this has only happened for the sake of a fraction of a percentage of the region’s annual economic output. Unfortunately, it is too late for us to negotiate a fairer deal for Cyprus. The logic of the austerity measures has become so complex as to become self-contradictory: in order to avoid a default on Cypriot government bonds, which would damage investor confidence, an effectual “default” on Cypriot savings has taken place… which will ultimately damage general investor confidence.

Simply allowing Cyprus to default on, say, 50% of its debts followed by an EU-funded loan to any pension funds or banks affected would have been a more productive path for European officials to follow.  This is particularly true when one considers how small the Cypriot national debt is compared to the European economy- Spain or Italy might be another story.  The effects of those who have agreed to take a risk on their capital (by lending to a government) actually enduring a loss on some of that capital  would be less severe than rendering savings banks unsafe investments. How can it be that investors have come to expect fair returns on gilts, and yet expect the losses to be paid by the general population who have recieved no such benefit?

Liberal Democrats Reject Mansion Tax

The Liberal Democrats no longer enjoy the trust of… anybody at all, really. Much like so-called centrist parties across Europe, they have done pretty much anything that their Coalition partners have demanded, doing the exact reverse of their promises made in 2010 with remarkable philosophical ease. It is therefore of little surprise that they are now preparing to betray the electorate on a further pledge: the Mansion Tax.

I have already discussed the Mansion Tax in some detail (search for it on the left if you’d care to remind yourself of what I wrote) and I considered it a good policy drawn up by the Lib Dems. I was delighted when Ed Miliband recently proposed its introduction to fund the restoration of the 10p tax band. At the time, the Liberal Democrats muttered about “policy grabbing”: it was a policy that apparently “belonged” to the Liberal Democrats. Which is why I’m mildly surprised that the party will be voting against legislation for it tabled today by the Labour Party.

Vince Cable has accused Labour of “playing party political games”. I would put it another way: Labour are testing his colleagues’ commitment to a fair tax system days before they vote for a collection of brutal spending cuts. Labour is doing what Oppositions are meant to do: holding Governments to account for their words and actions. It also tests the waters for legislation to be presented by the next Labour government. Will the Nationalist parties support the Mansion Tax? The Green Party will, but will Respect’s George Galloway bother to turn up to the House of Commons?

In a way that the Liberal Democrats have perfected over the past 25 years, they shout from the rooftops (other cliches are available) about their opponents’ failings, claim that they are somehow better, and then twist their account of events to suit them. As somebody said to me “Lib Dems talk like socialists and vote like Tories”. All I have to say is that a vote against taxing the richest few thousand in the country will speak louder volumes than any excuses made after that.

Radical Plans For Wales

Wales has an ill-deserved bad reputation. Yes, it did give us Neil Kinnock, but the country of over 3 million has contributed a wealth of talent to the UK. The amazing landscapes contribute greatly to British tourism. Large parts of Wales have suffered with the closure of coal mines, and the Welsh did not benefit from English levels of prosperity to begin with. Yes, overall Wales has suffered as a result of neglect from distant London governments.

Plaid Cymru, the Party for Wales, are significantly less successful than their counterparts in the SNP. Whilst Plaid Cymru does not advocate immediate independence for Wales, merely increased devolution until it has a stronger economy, the pro-devolution Welsh public have not overwhelmingly endorsed this approach, electing a Labour administration in the Welsh Assembly based in Cardiff. Could it be because PC’s leader is a “far-left socialist”, to quote the absurd claim of the even more unpopular Welsh Conservatives? (She arguably is to the left of Labour, but this doesn’t equate to extremism) The Welsh have never been afraid of socialists.

Nevertheless, polls show that 66% of the public support devolution of tax setting powers to the Welsh Assembly: they have said this for years, but the only difference is that Westminster is today minded to call their bluff. This is not out of any sympathy for “a people living for centuries under English oppression”, but rather out of a wish to support development of the economy to reduce the massive £18 billion gap between what the Treasury receives from Wales and what is spent there. There are complaints that we English “subsidise” the Scottish Government and their expensive policies like free university tuition (though we’re entitled to be bitter about the fact that students from Scotland and other EU states have no fees and yet English students are charged), lack of prescription charges and fees for social care. (Readers abroad: prescription charges are the only fees charged by the NHS, a small charge of £7.65 payable by those collecting prescribed drugs from chemists) but the “subsidy” per head is dwarfed by that for Wales.

I don’t see any problem with this state of affairs. Yes, I’d rather Wales was prosperous enough to balance spending and tax contributions, but as a constituent of the United Kingdom with limited devolution of taxation and spending powers, they are entitled to higher public spending in a similar way to that by which Liverpool spends more than it gives.

However, I don’t see how this claim can be justified if England finds the 40p tax band undercut, for example. Tabloids and rightwing reactionaries will make wild allegations about “paying Wales to take our businesses”, and it wouldn’t be easy to construct an effective counterargument. And in any case, Scotland is likely to compete with Wales on tax rates, whatever the outcome of next year’s referendum. And there is only a certain level of undercutting that can take place on England’s doorstep before it damages our tax base.

In conclusion, I think that this aspect of devolution is likely to hurt Wales, and Britain as a whole.

By Jack Darrant

On The Robin Hood Tax

Robin Hood Tax tug of war at the Barclays AGM

Robin Hood Tax tug of war at the Barclays AGM (Photo credit: Robin Hood Tax)

Since the idea was first widely mooted in 2008, most of us have dismissed the Financial Transaction Tax (or Tobin Tax or Robin Hood Tax)  as a wonderful idea that would not work due to the globalised nature of our financial services industry. Sweden introduced such a tax in the 1980s, and it crippled the nation’s financial services industry. Whilst a tax of 0.1% on the proceeds of any sale of shares, bonds and gilts sounds relatively insignificant, when one small country in a world of fluid capital attempts to impose it, that country becomes very uncompetitive (how I loathe the word- it is used as if a race to the bottom on tax rates is something nations should be taking up with gusto). If only it could be made to work, over £50 ($75) billion could be raised for EU governments. A similar sum would be raised in the US alone.

However, Britain has, thanks to the wisdom of Thatcher, Major and Blair, an economy dependent on financial services due to our lack of a strong industrial base. This is why I’m not surprised that our political leaders rejected an EU-wide FTT to fund EU spending, pointing out the convenience to our Continental partners that 80% of the revenues would come from Britain. I’m no friend of the bankers, but I see no point taxing them to our national disadvantage. Until we’ve rebalanced our economy (a long and expensive process that will take decades) we have to resist the temptation- and, I will freely admit, the moral pressure- to raise taxation way above the international standard.

But this does not mean we must abandon the idea of a FTT. Indeed, the policy only needs a little tweaking, which is what is happening now. 11 European states are working on an agreement to impose the tax within two years, creating a much more essential market for investment banks than Sweden’s lone market.  Crucially, the revenue will be retained by the respective nation states. In this way, they are testing the waters on behalf of Britain, the US and perhaps Japan.

I propose that Britain signs up only when the United States agrees to. In a time when increased tax receipts are badly needed by governments struggling with stubborn budget deficits, I doubt the Obama administration would need much persuasion- particularly when there are moves towards an EU-US, or “Atlantic” Free Trade Zone. Perhaps with the co-ordination of action by the governments of 800 million people, 45% of the global economy and the largest centres of scientific and economic innovation in the world, we have a hope of protecting our current standard of living against the demands of competition with slave labour in China, low tax rates in the Cayman Islands, a lack of regulation in poor African states, and all the insecurity that is created by their poverty.

If we want to improve the prospects of the peoples of the developed and developing nations, we need smart governments that reject the exploitation of cheap labour in the Third World and consumers in the First by corporate interests. Their cherrypicking will, left unchecked, threaten us all.