Lord Monks
Main Page: Lord Monks (Labour - Life peer)My Lords, I shall refrain from giving my usual congratulations to my noble friend Lord Harrison and his committee because this comprehensive demolition of the case for a European FTT is a demolition of the more general case for FTTs other than national ones. I am normally an admirer and fan of the work of the European Select Committee, but not quite so much of one this time.
After reading the report, with its relentless attacks on all the points made for a European FTT, I was reminded of a time in the Ministry of Labour during the Second World War when Ernest Bevin asked for a paper which set out the case for minimum wages in a number of key industries. He received a report from the Civil Service which gave 36 good reasons why it was totally impracticable. He said to the key civil servant, “You are a very clever person. Now give me 36 good reasons why this is a good thing”. He got his way in the end.
I do not know whether or not there are 36 good reasons for this proposal but the case is rather better than the one which is acknowledged by the committee. As others have said—I shall not repeat it—the FTT is not a new idea. After Tobin and as the century went on, the idea was put to one side. Things were going well—financial services were booming in the British and United States centres in particular—and “if it ain’t broke, don’t fix it” was very much the maxim.
However, the world changed in 2008 and that financial model has had a cardiac arrest. At the present time, much of the sector is kept on life support, courtesy of the taxpayer, with the cost of what has had to be done currently estimated at £20,000 per taxpayer and rising. It will cause problems for our children—and perhaps our grandchildren even—in years to come, and what were widely praised innovations and examples of Britain’s creative genius look rather more like seedy scams in the cold light of the experience of the past four years or so. A prized national asset is currently in danger of looking more like a liability.
I will not mention the scandals which seem to arise with some rapidity at the moment, but the sector must expect to come under close, intense, tough scrutiny and pressure. As Vince Cable recently acknowledged, we must recognise the strength of the lobbying that the City and other financial institutions are able to command, which is the subject of various newspaper reports at the moment. However, their trophy room is full of bright ideas that they have shot down which might have had an effect on the way in which the financial sector in London is regulated and works at the present time. I do not want the concept of a financial transaction tax to be put in that trophy room by the successful lobbying for which the City is noted.
Recent examples of successful lobbying include the weakening of the Vickers proposals, the cuts in UK corporation tax and taxes on banks’ overseas subsidiaries, and even the Financial Services Authority has been deployed to oppose the idea of a financial transaction tax.
I concede that the arguments are well set out in the report but perhaps I may address one or two of them briefly. There may be no chance of a global tax, but is there any chance of a global agreement on the environment? Are the United States Congress, the Australians and the Canadians likely to give in on that? I am not sure. They certainly were not at the start, but you have to keep on raising the issues and keep the pressure on. US supporters such as Warren Buffett, Bill Gates and so on continue to make the case for a global tax. I know it is very difficult, but do not give up, because things can change. It is important that we take a positive approach to the idea of a global tax, not a negative one.
The next point is: do not use the US Congress’s position as an excuse for European inaction. Europe still constitutes 30% of world GDP; it may be shrinking as other countries grow at a much greater rate than we do, but it is still the biggest single part of the world economy, if we can call it a single part. Giving a lead, as the EU can do, when it is well judged and well supported, is important. We in this House should not dismiss the argument with contempt but encourage its development in more practical ways.
There is already some development on the argument about how to spend the money raised, some agreements between President Hollande and President Barroso on global solidarity—it is a vague phrase, but we begin to see where it might go. Of the countries concerned, nine are committed, 10 are likely or possible and, as others have said, if we are not engaged they can go ahead without us. That poses all the problems which are the continuing story of the UK in the European Union: are we better inside trying to influence things or do we stand aside through opt-outs? I mention one area which is rather uncomfortable for the Labour side of the House, which is that when Britain was inside the social chapter, it was far more difficult from the union point of view to get anything through than when Britain was outside. I make that point with some discomfort about those years.
The next argument is about the role of London, which could lose a lot of prosperity and work through such a tax. That is a pretty powerful argument against any national tax or regulation. Those winning work are those with the least regulation and taxes. This week, my football club, Manchester United, located itself in the Cayman Islands. Thank you very much to the Glazers for that. They are the latest of many doing that. The search for the cheapest and least regulated jurisdiction is relentless. The concept of the Tobin tax or FTT is to stop that by having a world level playing field, at least to some extent. The quest needs to go on.
The final argument to which I shall labour some opposition is that such a tax will affect growth. That depends on its level. If it is a small tax, I agree that it may not be very effective in raising revenue, but if the levels are modest initially, I do not think that the effect on growth will be as lurid as painted in the report. The FTT is a good, simple idea—very complex to introduce, for sure. I hope that we will encourage work on that good idea rather than add to that list of moribund good ideas on display in some trophy room in the City. Where there is a will, there is a way, and we should not turn back in the search for a scheme that can work globally and that takes on the tax havens which are undercutting nearly all of us in the European Union. There may even be one or two in the European Union who are in the undercutting business.
I finish with a question which is similar to others which have been asked. In the Minister’s view, if there is an FTT in several big countries—Germany and France in particular—does he think that London will lose or gain?