The PM surprised many with his call for a ‘Tobin tax’ on banks. But the move is in tune with the economic climate and public distaste for excessive earnings
It might not pack the emotional punch of the scene between Hugh Grant’s loveable British PM and a bullying US president in Love Actually, but Gordon Brown’s clash with the US over the Tobin tax will raise a cheer among those who welcome a measure of UK independence from American influence.
In a surprise speech to the G20 summit at St Andrews last weekend, Brown called for a new ‘economic and social contract’ to ensure future banks do not reap all the profits during boom times while taxpayers pick up the bill for bail-outs during bad times.
The proposals were wrapped up in classic Brownite language: polysyllabic, strong on technical accuracy but short on rhetorical passion. There needs, he said, to be a debate ‘on proposals for an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global financial levy’.
Officials helpfully translated: ‘Mr Brown favours a levy, effectively a “Tobin tax”, on banks’ transactions such as equities, derivatives and currency trades.’
The prime minister also said that: ‘Britain will not move unless others move with us.’ Unfortunately, this had the ring of a self-fulfilling prophecy as US treasury secretary Tim Geitner then expressed hostility to the idea and press coverage of Brown’s initiative soured.
As usual, most commentators found fault with the PM and his tactics. He had failed to prepare the ground properly; he had not schmoozed important colleagues and foreign leaders; he did not brief the press sufficiently on his surprise announcement.
Yet later reports suggested greater surefootedness on Brown’s part, with leaked details of ‘secret’ plans to win over some of the City’s leading figures to a latter-day version of the scheme originally proposed by US economist James Tobin.
Perhaps the more interesting question is why Brown has changed his mind on the tax. Until recently, he was referring ‘to its very substantial drawbacks’. For decades, the measure was largely marginal to mainstream debate, the favoured policy of anti-globalisation protesters, radical economists and organisations such as War on Want.
So does Brown’s change of heart signal, in the unkind words of one Right-wing pundit, ‘the desperate vote-seeking move of a prime minister who knows he’s going down’? This seems unlikely given the limited populist appeal of Tobin and the growing support for some form of levy from other European countries and many senior financial figures.
Recent backing from figures of the stature of international financier George Soros and what the papers love to call the ‘formidable Adair Turner’ will have had a big impact on Brown. What’s more, the tax chimes with Brown’s deeper radical instincts, while both its rightness and plausibility has undoubtedly been confirmed for many by the near collapse of world capitalism last autumn. Then there’s the money. If implemented, it would bring in a much-needed £45bn windfall to the UK alone and, in terms of global revenues, a staggering £420bn.
It would not be the first time that a bold plan for the collective good has emerged from the near ruins of a world system. Look at the ideological and economic origins of this country’s welfare state.
There are also signs that a new, if highly cautious, economic radicalism will now be extended to the domestic front. Cameron has trumpeted the Opposition’s conversion to the cause of eradicating poverty. And deputy PM Harriet Harman has announced new measures on pay equality in the public sector.
Currently, ten civil servants and 180 public sector chiefs are paid more than the prime minister, a glaring anomaly. The call for top pay restraint might spread, with trade union protests at executive pay levels, even in the charity sector. Brown and Harman are merely responding to the new economic climate and the seismic shift in public opinion. Pay continues to haunt our headlines, be it the continuing row over MPs’ expenses or widespread anger at bankers’ bonuses.
In this new landscape, no-one, not even the Tories, can afford to be, in Peter Mandelson’s famous words, ‘intensely relaxed about people getting filthy rich’, here or abroad – even if the Tories are manifestly more militant about public sector pay than about gross inequalities in the private sector.
Melissa Benn is a writer and journalist
