Chancellor should introduce a 'Financial Transaction Tax' to fund growth strategy
British Investment Bank would help return the economy to sustained growth.
Britain should follow the lead of eleven other EU countries and sign up to a financial transaction tax on shares, bonds and derivatives, according to a new report to be published next week by the think tank IPPR.
The report quotes estimates suggesting the tax could raise up to £20bn and argues that for a number of years £10bn of the funds raised should be used to capitalise a proper British Investment Bank that would invest in infrastructure projects and lend to small and medium-sized business, so helping to return the economy to sustained growth. In the short-term, excess funds could be used to reduce the deficit, so easing pressures for cuts in welfare and departmental spending.
The report shows that stamp duty on UK shares (at 0.5%) brought in just £2.8bn last year but brought in £4.2bn before the 2008 economic crash. It argues for extending this to cover all trading of bonds and equities (at 0.1%) and the trading of derivative products (at 0.01%).
The report shows that more than 30 nations have implemented various forms of financial transaction tax. The UK has a 0.5% stamp duty on equities and the US has a tax on equities (0.0013%) and securities futures (flat fee of $0.004). The other 28 countries are: Argentina, Australia, Austria, Belgium, Brazil, Chile, China, Finland, France, Greece, Hong Kong, Indonesia, India, Ireland, Italy, Malaysia, Morocco, Pakistan, Peru, Portugal, Russia, Singapore, South Africa, South Korea, Switzerland, Taiwan and Turkey. When the 11 nation European financial transaction tax is introduced, the above will expand to include Estonia, Germany, Slovakia, Slovenia and Spain.
IPPR Chief Economist, Tony Dolphin, said:
"This week, Business Secretary Vince Cable made the case for kick starting economic growth by investing in infrastructure projects while the Prime Minister made the case against unfunded tax cuts and borrowing for spending.
"This new report makes the case for raising revenue, tackling the deficit and investing for growth. There is an alternative, and this is it. The British economy needs new economic priorities and economists must expose the political fantasy that the only options are more borrowing or deeper cuts. We can raise more revenue, tackle the deficit and kick start economic growth at the same time."
Notes to Editors
IPPR's new report - New priorities for British economic policy - will be available here.
Tim Finch, 07595 920 899, [email protected]
Richard Darlington, 07525 481 602, [email protected]