Transaction tax: the detractors need to name their alternative
The TUC call to use a tax on major financial transactions to help reduce the public deficit has created a minor blog bust-up. But one important point at risk of being overlooked here is the question of what might be the alternatives to a transaction tax.
The TUC believes that the deficit is not an urgent problem but it is one that will need to be dealt with over the medium term. In our submission to the Treasury ahead of the PBR, we argue that any measure designed to reduce the deficit needs to meet five criteria. It must be:
- effective: any measure must genuinely reduce the deficit;
- progressive: the costs of any measure must fall to those most able to pay;
- proportionate: any measure must meet the reality of the challenge posed by the fiscal problems rather than any exaggerated or understated claims;
- limited in its economic consequences: any measure must not prolong the recession of threaten recovery;
- just: the costs of any measure should not fall on those who bear no responsibility for the financial crisis and recession that has caused the fiscal problems.
Our concern is that the leading contenders for addressing the deficit – major public spending cuts, a big rise in VAT or a big rise in income tax – fail when judged against these criteria. A transactions tax, we felt, did meet most of these criteria. I accept not everyone will agree with that conclusion but given that we are in a tough fiscal situation, there must be a certain obligation on those entering the fray to identify their alternatives and explain how they meet these criteria.
Of course, they may not agree with the criteria but then they need to explain that position as well.
Who knows, we may end up with a constructive and creative discussion rather than the usual snarky blog fight. Hope springs eternal …