Business secretary Vince Cable has rejected calls for a financial transactions tax in the EU, claiming it would be damaging for London.
The Tobin tax, named after the late US economist James Tobin, originally proposed a tax on currency market transactions. The idea was to curb potentially damaging exchange rate speculation by increasing the cost of those transactions to decrease the volume.
The latest iteration of the Tobin tax includes share, bond and derivatives transactions as well as currencies. Vince Cable isn’t the only one against it – George Osbourne told EU finance ministers that Britain would not support it in the EU and David Cameron has also spoken out against EU 'attacks' on London.
It's not that the government necessarily has an objection to the tax itself - any opportunity to swell the coffers of the exchequer are usually welcomed - but their argument is that to impose the tax on a regional basis rather than globally is detrimental to those regions. Currently, the US and Asia are opposed to a financial transactions tax.
Why does this matter to London? It's the financial institutions who caused all this trouble, right? Surely it's the best thing to tax them and hope they clear off to some other country as a result? The Archbishop of Canterbury certainly agrees:
'There is still a powerful sense around – fair or not – of a whole society paying for the errors and irresponsibility of bankers; of impatience with a return to 'business as usual' – represented by still-soaring bonuses and little visible change in banking practices.'
London mayor Boris Johnson doesn't, and has previously made it his business to keep London as an international centre of finance; last year he urged HSBC to reconsider a move to Hong Kong, he's supported the building of UBS's new Broadgate office against its detractors and Barclays' brand presence has been, erm... branded into our minds as a result of the cycle hire scheme. He was also dubbed a friend of the bankers by Occupy protesters. But Boris's take on banks is that they are a vital cog in London's economy, earlier this year, he said:
'Most people recognise banks yield considerable sums in tax revenue for this country which pays for schools and hospitals and I would not want that tax going to some other jurisdiction.'
So, despite recent protests against austerity measures resulting from the financial crisis, protests against capitalism and corporate greed and demands that extra taxes are levied on the rich, only a global Tobin tax will satisfy the government.