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In popular legend, Robin Hood roamed the countryside with his band of Merry Men, stealing from the rich and giving to the poor. Another interpretation is that he was the original hoodie who led his gang on a rampage, stealing whatever took their fancy.
Today we have our own real-life Robin Hood in Richard Curtis, the comedy writer. Among his Merry Men are Bill Nighy and other celebrities including Bono, and representatives from a range of organisations — Oxfam, Save the Children, Action Aid and others.
Curtis's proposal, launched this week, is to impose a 0.05 per cent tax on international bankers' transactions. He's calling it the “Robin Hood” tax. Diverting 50p from every £1,000 the banks trade in shares, bonds, derivatives and foreign currency could raise up to £250 billion per year. The money would be spent on under-resourced public services in the UK and other countries where the banks do business, and to help fight global poverty and climate change.
It's smart: the size of the levy is not such that the banks would be mortally wounded. And as Curtis points out, we pay VAT at 17.5 per cent every time we go to the shops: why shouldn't the banks pay 0.05 per cent every time they buy or sell a financial product?
It's cleverly designed: half the revenue would be kept by the country where the deal took place, and the remaining 50 per cent split between reducing global poverty and tackling climate change. For leaders of developed nations struggling under public deficits, those sorts of sums for their own country's public services would be a godsend. It's hard, too, to argue against serious cash going to Africa and elsewhere, and alleviating climate change (£60 million-plus going to poorer nations to reduce their emissions would be enough to free the deadlock of the recent Copenhagen summit).
It would be a brave politician who would denounce the Robin Hood tax now. For Curtis's cunning is also in the timing: he's linking banks' unpopularity with the biggest challenges facing the planet. Come to that, which banker is going to put their head above the parapet and say their organisation, having made billions, can't afford a measly 0.05 per cent?
Of course, there will be quibbles over the practicalities of collection. But as all such transactions are done via computers, programming them to add the tax would not be that difficult.
There are those, however, who subscribe to a different view of Curtis, who see his tax as the instrument of Robin the Hoodie, rather than a convincing world-changer.
They're entitled to say we've been here before — indeed Curtis himself was involved in the previous Drop the Debt and Make Poverty History campaigns, neither of which achieved what they said on the tin. How will we know this colossal amount of cash will reach the right people? We don't.
That's one concern. There are others. The claim made in favour of the tax by Joseph Stiglitz, the Nobel Prize-winning economist, is that it would help combat the short-term speculative financial activity we've seen wreak such havoc these past few years. That makes it similar to the Tobin tax — conceived by another Nobel laureate, James Tobin — that was proposed to protect vulnerable nations from people manipulating the currency markets for their own ends.
But the Tobin tax was much higher, at 0.5 per cent, than the Robin Hood tax. At that level, the former really would have made a difference. At 0.05 per cent, the latter will be merely an inconvenience and not stop the speculators.
Curtis is maintaining the Robin Hood tax would not hit the public — it would apply only to the sort of dealing that occurs in the City, not high street banks, restricted to trades between banks and other financial institutions. Bank profits and bonuses would suffer, he says, but not the costs incurred by ordinary people in their dealings with the banks.
This has to be naive. The banks have a history of passing on their costs to the customer — they are bound to ensure the tax is recovered somewhere.
Proponents of the tax might like to think there has never been a better time for the banks to voluntarily change their ways. But while some banks have made noises about charitable donations, and bonuses have been curbed, there has been no outpouring of mea culpa.
In short, whatever Curtis and his pals may suppose, the evidence suggests the banks still do not get it — which means that if they were to be required to pay 0.05 per cent, even to improve the world, they would still make sure they were not out of pocket.
The banks also worry, possibly rightly, that this is the thin end of the wedge, that 0.05 per cent today may become 0.5 per cent tomorrow, that governments will be so strapped for cash in the future that banks will be regarded as some giant hole-in-the-wall machine.
If the Robin Hood tax is to become a reality, it needs to be agreed by all the world's leading economies. That is by no means guaranteed. In the past, the US in particular has been dead set against a financial transaction tax. In Europe, Gordon Brown, Angela Merkel and Nicolas Sarkozy have all been strong advocates. It's possible they could move ahead and that the US would fall into line later. But without the US it would not be anything like as meaningful or as successful — the US investment banks are dominant players in the world financial markets.
Brown is today dropping hints that a global tax may be near. Despite the US opposition, the International Monetary Fund has been looking at such a plan and may be ready to submit an outline to its meeting in April, with endorsement by the heads of the G20 group of nations in June.
It just may be that Curtis has struck at exactly the right moment, like Robin Hood of old. But as far as many bankers are concerned, he is little more than a hoodie.
Reader views (11)
It does seem a shame that a business editor of even a free newspaper has not got the acumen to figure out why this tax cannot go ahead. But for the benefit of those who dont understand lets take an example and work it through. BP say needs to hedge 10 billion dollars against pounds so calls the bank in the UK and requests a price. The tax on that trade 0.05 pct is 5 million the bank in the UK will have to charge the company in the price ie 5 million because they will have to lay off that position with other banks, if the charge is only applicable in the UK say then BP will be able to get a better price from another Bank somewhere else in the world because in other jurestrictions no tax will be imposed. Now it may be as you say an inconvenience 5 million on a 10 billion transaction but guess who ultimatly will pay! Aslong as there is one country even outside the G20 willing not to tax then to whole system falls appart. We in the meantime will see our financial services decimated. Why is it that the Bank of England , the Head of the IMF, the president of the European Central Bank, the US, Canada ,China and even Rusia think it is unworkable, indeed Mervyn King says he knows of NO central banker who supports this. Is it not ironic after we spent billions rescuing the banks we will now drive them to Hong Kong, and do their business there and take Londons and UKs GDP nearer that of Somalia. You sir are advocating something that will render the UKs financial services to History.
- Pangloss, london, 11/02/2010 22:07
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Oh no! Don’t give an alcoholic a drink – never offer a government any money. This tax is not right-minded. We need fewer taxes not more. Soon there simply will not be an income generating element of society. Angela Merkel and Nicolas Sarkozy need not worry about such a tax – they don’t have a serious financial services sector to tax. We do so Gordon Brown should be focussed on getting the strength back into what we are good at, not playing the idiot globally.
- John Davie, St Albans, England, 11/02/2010 21:46
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Forget it. Once introduced the thieving Socialists will just jack it up ..waste the money on political patronage... remember where VAT started out?
- James Macleod Ritchie, Oyster Bay Cove, 11/02/2010 21:05
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The "Robin Hood" tax is pure pie in the sky nonsense. Even at 0.05% the affect would be devastating to the city. The £250 billion yield also - probably more than the entire profitability of the world banking system!
As Chris Blackhurst should know, most of the trading in the City is high volume low yield. Trading volumes would collapse - even at this "low" rate. Further to this most derivatives that are traded are against a "notional" amount. The face value of the transaction or what it is based on (the "notional") is never exchanged.
Quite why Gordon Brown is proposing such a tax is beyond me - London as the centre of international finance would be devastated? Thousands of people would loose their jobs directly, plus many more who rely on City workers for their income.
Mea culpa is one thing, Hara Kiri quite another.
- P Hall, UK, 11/02/2010 20:57
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100% of the money should go to the British public
- Anon, London, 11/02/2010 19:43
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I am seriously starting to wonder about the kind of idiocy that people come up with.
This is touted as a "doesn't really hurt anyone" tax, as it is so tiny in proportion.
What people overlook is that banks do have even much smaller margins that this tax.
The debate is leaning that banks should do more business through clearing houses and exchanges where they collect fee income and do not take own positions, hence making the whole trade a lot less risky.
If you look at your - even retail - broker, and look at something simple.
Take a gold future, worth about 107,000 Dollars at the moment.
What does it cost to transact now ? About 3 Dollars, maybe, retail.
Take off the costs and you come to a much smaller number that would be the actual take of any broker or bank.
Now take a look at this tax - 50 cents per 1,000 Dollars.
So to undertake this trade doesn't cost you 1 dollar anymore, but incurs you a tax on top of 53 Dollars 50 cents.
Suddenly this "tax" isn't anymore a tiny tax, but one that introduces an extra fee that is 16 times bigger than what's actually being charged in the market today.
On top of that we all will pay it - when you take out holiday money in a different currency, whatever you buy really, as let's face it, most companies hedge their inputs.
Well meaning as this idea may be, it would have ruinous consequences for everyone.
You simply can't introduce a charge that in reality will be 50 times bigger than what people are charging for it.
- Mike-London, London, 11/02/2010 18:40
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I work in finance in the city, and the profits I chase are much less per transaction than the proposed taxation level. So should the tax be imposed my business closes. Net result a loss of significant direct tax revenue for the government. I am not alone. Transaction volumes are high because profits margins are low. Do not be deceived, i am left to think these people don't know what they are talking about, or that they are not clear in their ob jectives. If we want to raise tax, the best way isto be honest a d tax profits. Suggesting that ordinary people will not be affected is frankly naive at best. When you want euros for your holiday the price will have the tax in it. When the international company you work for wants money for payrolls or supplies they will be hit. When your pension fund invests your money in the markets they will pay the tax. This is an illconceived tax suggested on the back of a wave of hyperbole and populism
- Francis, City, 11/02/2010 18:21
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Great idea for a new tax, those being taxed can easily afford it and have no moral entitlement to the money in the first place.
But please dont waste the money raised on climate change - we are already wasting too much money on this nonsense - lets not add to it.
All the money raised should go to help the poor.
- Alan Townsend, London UK, 11/02/2010 18:03
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I don't want a penny of mine spent on "fighting climate change" as this is about as much use as spending the money on chocolate teapots.
Also, if charities want money for the poor, they are more than capable of finding ways to raise this without strongarming the money out of us through indirect taxaction.
Finally, the government wastes billions each year on public services through overstaffing, failed projects and quango's. Those savings would be better achieved than masking the problem by throwing more money at the civil service.
- Nobby Clark, Perth, the Scottish one, 11/02/2010 16:15
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It is a new approach to taxation, that's all. We've had income tax and VAT and a poll tax and parking fines. Now the time has come for a financial transaction tax. If nothing else, it will remind the financial community that they too are involved in the commonwealth of nations. And yes, it will be the thin edge of the wedge, like every other form of taxation and penalty charge. The US will follow suit when it realizes how big its budget deficit is.
- Bloke, Lambeth, 11/02/2010 15:05
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I don't see the problem being the collection of this tax, but the distribution of the funds. You can't get two people to agree which "climate change" project is worth spending money on, you can't even get people to agree there is a climate change problem! Who decides where the money goes? Not only the 50% "helping the poor" but also the 50% staying in the country of origin? Are we going to trust our governments to make these decisions - not me. Put another lump sum of money into MPs hands, and watch it disappear down the toilet - or into their back pockets.
I think the tax is a great idea - but we must get the details right first.
- E Heyworth, Chelmsford, Essex, 11/02/2010 12:52
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