Alexander Shaw examines the implications and why it isn’t all it is claimed to be
So there we have it! A new Shadow Chancellor and the Robin Hood tax is now back on the table. Arguing in his speech that the tax would ‘help pay for improvements to the NHS and other public services’ Mr McDonnell believes that he could not only reign in the excesses of the City, but also that it is a reliable way to help pay for services. Whilst criticised by campaigners for the rights of the individuals, he denied that he was planning ‘big’ tax increases, instead commenting that ‘his speech could be pretty boring’. But what is the Robin Hood Tax?
Calling for a tax of around 0.05% on all transactions, the Robin Hood tax taxes the trading and interactions of shares, bonds and currencies, which campaigners have argued will raise around £20bn per year for the UK treasury. However, Chancellor George Osborne has already resisted moves by the EU, which earlier in the previous parliament attempted to impose a Financial Transaction Tax (FTT) on the UK and the City, of which he argued infringed UK Sovereignty and disproportionately affected the UK, funding shortfalls in the EU budget for policies such as the Common Agricultural Policy.
When discussing the FTT and the Robin Hood Tax, Mayor of London, Boris Johnson, explains that ‘any Financial Tax threatens the City of London’s pre-eminent position as a global financial centre’ pointing out that ‘John McDonnell…would put people’s livelihoods here at risk’.
John McDonnell…would put people’s livelihoods here at risk’
However it is not just Mr Johnson who has concerns over such a tax. Christian Voigt, a business solutions architect explains that ‘based on what we know of the FTT so far, there is a strong risk that it will hurt the market’. Mr Voigt draw links between the situation that markets are currently in, with the tax ‘impacting those who trade a lot. Market makers are needed to provide liquidity to the markets in times of stress – but the FTT will discourage them from doing so at the very moment when the market needs liquidity the most’.
for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle
Further to this, the Adam Smith Institute calculates the 20-year cost to the UK economy would be £25.58bn as a result of lost growth. Finally, Russ Mould, and investment director at AJ Bell cited the words of Sir Winston Churchill, who argued that ‘for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle’. Whilst on face value, any tax may seem like a good thing, transferring the power of money spending from our own hands into those of politicians, the negative effects may be far deeper reaching than at first calculated, or anticipated.
I suppose, as with any tax, the question needs to be asked, who is better at spending our hard earned money?