The longstanding campaign for the Tobin Tax was once compared to the futile search for the Loch Ness Monster. So it is apt that an MP from Scotland, Gordon Brown, has started to scotch the cynics and trumpet the idea of a transaction levy. The UK now joins Germany, France and other countries as keen advocates.
The levy is a radical change in UK thinking. I remember a Treasury Minister dismissing Tobin in a meeting with a delegation a decade ago. But life is a great teacher and times have changed. The deeply damaging behaviour of bankers in the global casino economy sparked a world recession and necessitates new thinking and funds.
UK taxpayers must stump up £1.5 trillion to clear up the mess made by the masters of the universe.
Suddenly a transaction levy is centre-stage thanks first to the Chairman of the Financial Services Authority Adair Turner whose support increased its credibility in the summer.
The PM has spectacularly broached this taboo this Autumn. This is particularly striking given the Citys old stranglehold on UK policy-making.
A fair and popular question is why should the many suffer swingeing spending cuts and/or tax increases to pay for a few bankers mistakes without their changing their tune – from the bonus culture to a transaction levy? If we are all in this together, as George Osborne said, why dont the fat cats cough up their share?
Browns surprise support at the recent G20 summit in St Andrews for a global levy and other measures has unleashed a more popular cat among the plump pigeons.
We should back Brown when he says that it cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us.
The PM is on the money in demanding a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards.
The potential benefits of a global tax have evolved over the years. The Tobin Tax was initially seen in the early 70s a means of stabilising the then far less volatile markets by throwing sand into the wheels of global finance.
As the scope of global currency speculation soared massively, campaigners banked this benefit of greater stability and focused on the massive revenues that could also be raised.
The Austrian government estimates that a levy on all financial transactions could raise £400 billion. They make the assumption that the levy would reduce transactions by two-thirds but this could be a liberal assumption. A minute levy on foreign exchange trades would raise less.
One idea would be to move rapidly towards a levy on foreign trade transactions as the first step in winning international agreement on taxing all transactions.
Brown suggests that the proceeds of a levy could be devoted to tackling climate change a canny move in the run-up to the vital Copenhagen summit.
Gordon Brown has gone out on a limb and received some flak but could yet win the fight if he and others build international alliances and win public support, including parts of the City as well as unions and experts.
Avinash Persaud, chairman of Intelligent Capital and a former banker, argues that: Financial transaction taxes are not only commonplace, but have become easier to enforce. Persaud adds Where there is a will, there is a way. Chancellor Alistair Darling also says: No one is saying this is easy, but if you don’t look at the possibilities and ask yourself whether or not there could be a fairer way of making sure these big multinationals make a fair contribution, then I think you would be missing something.
The traditional objection is that it requires an international regime to minimise evasion. But the trillion dollar a day trade is recorded electronically which makes it easier to track and tax transactions in the same way as tax havens are being tackled.
Supporters of a Tobin-type tax now have a golden opportunity to build the momentum behind this obvious measure of fairness to overcome the deeply damaging power of the banks and brokers.
The Conservatives and some papers accused Brown of chasing headlines and being isolated. But most people would welcome headlines saying that the banks should contribute to their salvation and not just rely on poorer punters to pay the costs of the banks failures. With a more concerted campaign, it could one day become a decent social democratic source of finance for development and alleviating climate change. The key point is establishing a global tax which is difficult to reverse.
Its the right thing to do. Economist Will Hutton says that this is potentially game-changing. Let the Conservatives stick to the bad old days of socially useless banking and global greed whilst Labour demands a fair deal from finance capital. Gordon Browns suggested sin tax can help civilise the wilder excesses of global finance, raise billions for good causes and monster the Tories.
See www.stampoutpoverty.org for updates on the campaign.