Ed Miliband’s One Nation Labour has, it seems, got more immediate traction than his responsible versus predatory capitalism distinction of last year. Yet arguably his 2012 speech forms a continuation of the themes of 2011: the same challenging of vested interests, the continued emphasis on rebalancing our economy both geographically and away from the privileged few, and the same desire to reward the hard-working small businesses vital to community life and a productive economy.
Gradually then, the leadership is sketching out the type – if not yet, five point plan aside, the specific content – of the Labour led economy we may see post May 2015.
With that in mind on the Monday evening of conference (the day Ed Balls pledged to fight for ‘an international financial transaction tax’) Compass, the Co-operative Party and the Robin Hood Tax campaign hosted a fringe event, Ideas for a Fairer Economy, which set about filling in what this detail may look like. The event, with Chris Leslie MP, Polly Toynbee, Larry Elliott, Frances O’Grady, Neal Lawson and David Hillman on the panel, saw a packed room debate a number of topics from funding childcare to the tough decisions on particular benefits Labour will have to take in the near future.
There was however one issue that dominated discussion, and which is steadily gathering momentum in the Labour movement (evidenced by a survey on this site which recently showed 78% support for the tax).
This is the potential adoption of a broad based Financial Transaction Tax which would roll out our present tax on shares to include modest levies on bond and derivative transactions. Should Labour adopt the policy, it would merely be following in the steps of 11 European economies including Germany and France which this week have forged ahead with an FTT. Christine Lagarde of the IMF has also lent her support of late.
A broad based FTT would raise some £20bn in the UK annually – money which could cost progressive (and popular) policy pledges to re-institute Educational Maintenance Allowance (£500m), help capitalise a British investment bank (Lord Skidelsky has put the amount needed at £10bn, the IPPR at £40bn) which could make a real difference to SME finance (arguably unlike the Coalition’s recently announced and truncated version), or drastically reduce child poverty (estimates have put achieving this at £19bn worth of spending to 2027).
An FTT would also help us not only to meet our commitments on international aid and climate change abroad, but increase them. In the global north the recession has cost jobs, in the global south (as remittances have declined post 2008) it has cost lives – and particularly in times of economic depression Labour must not forget Britain’s wider responsibilities. Allocating a significant proportion of FTT revenues to such ends would be a valuable and bold step.
At the same time, in terms of the domestic use of such monies, could local government offer the most deserving beneficiary of a large percentage of the revenue?
After the cuts implemented from the 2010 Comprehensive Spending Review onwards, local government and, consequently ordinary people who use public services, have faced a tougher time on a daily basis. Meanwhile, several functions – including public health – are being devolved to local government for the first time in decades, and councils across the country are being given new responsibilities (such as over council tax benefit) whilst seeing a reduction in funding. Local government is having to do much more with less, and despite numerous examples of innovative work by councillors across the country, cuts in grant have and will increasingly take their toll. The FTT could help plug such gaps, and deliver a shot in the arm to communities across the country. Resourcing some of the largely theoretical powers within the 2011 Localism Act – such as the Community Right to Buy – with meaningful funding streams would potentially be a good start in sketching out Labour’s alternative to the discredited Big Society.
What could councils do with such money? Well, inevitably, this will vary council by council according to local priorities. Yet with well over 100 Sure Start centres having closed since the General Election, and with £250bn+ of infrastructure investment needed across the country in the coming years, there is clearly much that could be done with the revenues. Local government might wish to use the monies for either capital or revenue expenditure – that would be debated in each authority and in the local government sector generally in due course – but the future use of such revenue depends on Westminster (which, given the Coalition’s intransigent stance, means a future Labour government) first committing to implement the tax.
FTTs have been successfully introduced across the globe – and levied, as with our own stamp duty on shares, unilaterally. The UK – and the Labour Party – can go further than it has done previously. France and Portugal have levied unilateral FTTs this year whilst leading European nations are coming together to introduce a common, broader, series of taxes. An FTT would curb unwanted high frequency trading, stabilise our financial markets (much needed after 2008) and, as this article has illustrated, raise significant revenues at a time of pressure on public finances.
Call it a One Nation that looks beyond the mile or so around Bank tube station. Call it a Responsible Capitalism that backs business with investment, our young with skills training, and our people with opportunities for jobs. The overarching agenda is clear however – an FTT would allow Labour to deliver a fairer economy, contribute towards a costed-out manifesto at the next election, and reduce the effect of the Tory charge – ‘One Notion: borrowing.’ It could help local government deliver on the sterling work it is already doing in tough times, and aid local communities across the country. As European countries forge ahead, an FTT must increasingly be part of Labour’s offer to the electorate going forward.
Richard Carr is a Policy Adviser at Stamp Out Poverty