Robin Hood stole from the rich and gave to the poor, Bill Nighy would steal from savers and give to the politicians

November 03, 2011 6:41 PM

This evening, Channel 4 News at 7pm will be screening a debate between me and the actor Bill Nighy on proposals for a Financial Transactions, or Robin Hood, Tax.  UPDATE: You can watch the video after the break.


Bill Nighy wrote for the Guardian recently arguing that the Financial Transactions Tax was an all-round wonderful idea only scuppered by bankers not wanting to pay their way.  The reality couldn’t be further from the truth.  The reality is that the people who would pay this tax would be savers struggling to afford a comfortable retirement.  Already struggling with high inflation, they would be hit again as the share prices that underlie the performance of most pension funds would be depressed.  In the longer term, particularly if the tax isn’t applied globally, workers would suffer too with fewer opportunities and lower wages as investment went elsewhere.

He hides that problem with the misleading statement that according “to the IMF it would be paid predominantly by the richest”, which he then translates for the rest of his article into this money coming out of the pockets of the likes of Goldman Sachs executives.  The reality is that the IMF paper he is referring to says that burden would “fall on owners of traded securities, at the time the tax was introduced, as the value of stocks, bonds and derivatives subject to” the new tax.  In other words, savers.



Of course people with savings are generally significantly better off than those without them.  For example, people on benefits aren’t saving and their retirement income will depend on the level of state pension entitlements rather than investment returns.  The other group this won’t affect as much – though they are actually relatively well off – are public sector workers, whose unfunded, defined benefit pensions also aren’t dependent on investment returns.

Savers will pay and, while they are on average significantly better off than people who aren’t saving, they aren’t all plutocrats.  We are talking about plenty of normal people struggling to save and invest, to build up a pension fund and provide for themselves and their family.  This certainly isn’t a tax on the banks.

British politicians are constantly urging people to save, that’s why things like tax free ISAs are available.  Hitting them with a new tax would achieve precisely the opposite and further put people off putting money aside for their old age.  That means taxpayers will have to pick up the bill instead and poses a mortal threat to the long term stability of our public finances with an ageing population.

In the longer term, by making it more expensive for companies to raise finance this measure would depress investment.  Particularly in an open economy like ours, and if the tax wasn’t truly global, capital would “flow out until its after-tax return was restored to the world market level.”  Less investment means fewer jobs and lower wages.  As the IMF say: “In the long run, capital owners would therefore not bear the burden of the STT; it would fall on workers, who as a result of the smaller capital stock would be less productive and receive lower wages.”

Other countries have seen that these taxes don’t work.  Australia abolished a stamp duty on shares in 2001, for example.  The IMF reported that these taxes have been in steady decline internationally in recent years.  We do have a stamp duty on shares in Britain but it is a disastrously inefficient tax, despite some differences in the conditions making it less onerous than a pure transactions tax.

In 1999, researchers at the London School of Economics found that while other transaction costs for UK equities had more than halved while Stamp Duty had remained constant.  As the Forsyth Commission reported (pgs. 103-104), those higher transaction costs depress share prices by up to 10 per cent.  One study suggests that if it were abolished the increase in the market capitalisation of the FTSE All Share could be in the region of £150 billion.  That suggests the around £4 billion a year the tax raises is pretty poor value.  If the Robin Hood Tax is supposed to raise much more money than that, then it will do even more to destroy share prices.

And stamp duty on shares also makes it more expensive for companies to raise the finance they need to grow and compete with rivals abroad.  Oxera found that abolishing the tax would reduce the cost of equity by 7 to 8.5 per cent on average, but technology companies for example might pay up to 12 per cent less.  That means abolishing the tax would increase investment, and bring more jobs and higher wages for British workers.  Bill Nighy wants us to go in the opposite direction.

This tax would be bad for the City, but that doesn’t make it good for the rest of us.  It would be an immediate disaster for savers and a longer term disaster for workers.  It would also increase volatility in financial markets, as I have written before, thereby increasing risk.

And that’s before we get onto how the money will be spent.  Bill Nighy’s idea is that it will go on aid for poor countries.  But even if you think the rapidly rising development budget – while taxes are rising and spending is being cut here in Britain – isn’t enough, European politicians appear to have other plans.  They want to use it to finance their wasteful spending and grand plans in Brussels.  Is that where you want your savings spent?

This is a bad plan and the Government should reject it regardless of whether international agreement can be secured.This evening, Channel 4 News at 7pm will be screening a debate between me and the actor Bill Nighy on proposals for a Financial Transactions, or Robin Hood, Tax.  UPDATE: You can watch the video after the break.


Bill Nighy wrote for the Guardian recently arguing that the Financial Transactions Tax was an all-round wonderful idea only scuppered by bankers not wanting to pay their way.  The reality couldn’t be further from the truth.  The reality is that the people who would pay this tax would be savers struggling to afford a comfortable retirement.  Already struggling with high inflation, they would be hit again as the share prices that underlie the performance of most pension funds would be depressed.  In the longer term, particularly if the tax isn’t applied globally, workers would suffer too with fewer opportunities and lower wages as investment went elsewhere.

He hides that problem with the misleading statement that according “to the IMF it would be paid predominantly by the richest”, which he then translates for the rest of his article into this money coming out of the pockets of the likes of Goldman Sachs executives.  The reality is that the IMF paper he is referring to says that burden would “fall on owners of traded securities, at the time the tax was introduced, as the value of stocks, bonds and derivatives subject to” the new tax.  In other words, savers.



Of course people with savings are generally significantly better off than those without them.  For example, people on benefits aren’t saving and their retirement income will depend on the level of state pension entitlements rather than investment returns.  The other group this won’t affect as much – though they are actually relatively well off – are public sector workers, whose unfunded, defined benefit pensions also aren’t dependent on investment returns.

Savers will pay and, while they are on average significantly better off than people who aren’t saving, they aren’t all plutocrats.  We are talking about plenty of normal people struggling to save and invest, to build up a pension fund and provide for themselves and their family.  This certainly isn’t a tax on the banks.

British politicians are constantly urging people to save, that’s why things like tax free ISAs are available.  Hitting them with a new tax would achieve precisely the opposite and further put people off putting money aside for their old age.  That means taxpayers will have to pick up the bill instead and poses a mortal threat to the long term stability of our public finances with an ageing population.

In the longer term, by making it more expensive for companies to raise finance this measure would depress investment.  Particularly in an open economy like ours, and if the tax wasn’t truly global, capital would “flow out until its after-tax return was restored to the world market level.”  Less investment means fewer jobs and lower wages.  As the IMF say: “In the long run, capital owners would therefore not bear the burden of the STT; it would fall on workers, who as a result of the smaller capital stock would be less productive and receive lower wages.”

Other countries have seen that these taxes don’t work.  Australia abolished a stamp duty on shares in 2001, for example.  The IMF reported that these taxes have been in steady decline internationally in recent years.  We do have a stamp duty on shares in Britain but it is a disastrously inefficient tax, despite some differences in the conditions making it less onerous than a pure transactions tax.

In 1999, researchers at the London School of Economics found that while other transaction costs for UK equities had more than halved while Stamp Duty had remained constant.  As the Forsyth Commission reported (pgs. 103-104), those higher transaction costs depress share prices by up to 10 per cent.  One study suggests that if it were abolished the increase in the market capitalisation of the FTSE All Share could be in the region of £150 billion.  That suggests the around £4 billion a year the tax raises is pretty poor value.  If the Robin Hood Tax is supposed to raise much more money than that, then it will do even more to destroy share prices.

And stamp duty on shares also makes it more expensive for companies to raise the finance they need to grow and compete with rivals abroad.  Oxera found that abolishing the tax would reduce the cost of equity by 7 to 8.5 per cent on average, but technology companies for example might pay up to 12 per cent less.  That means abolishing the tax would increase investment, and bring more jobs and higher wages for British workers.  Bill Nighy wants us to go in the opposite direction.

This tax would be bad for the City, but that doesn’t make it good for the rest of us.  It would be an immediate disaster for savers and a longer term disaster for workers.  It would also increase volatility in financial markets, as I have written before, thereby increasing risk.

And that’s before we get onto how the money will be spent.  Bill Nighy’s idea is that it will go on aid for poor countries.  But even if you think the rapidly rising development budget – while taxes are rising and spending is being cut here in Britain – isn’t enough, European politicians appear to have other plans.  They want to use it to finance their wasteful spending and grand plans in Brussels.  Is that where you want your savings spent?

This is a bad plan and the Government should reject it regardless of whether international agreement can be secured.

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