Bank levies and financial transactions taxes are not incompatible
The announcement by the Obama administration that a bank levy will be introduced to claw back $90 billion of the US bank bailout over the next ten years has added new fuel to the fire over financial sector reform, and has upset the calculations of those who thought that the business was returning to pre-crisis laissez-faire. Banks may well be regretting those bullish bonus announcements of recent weeks, as they realise that politicians are no longer cowed by the power of Wall Street and the City of London – also evidenced by the UK’s one-off bonus tax.
But battle lines are being drawn by some between the various solutions on offer – in the US a bank levy, in Europe a financial transactions tax (FTT). Labour and Tory are said to be divided on this too, with Osborne announcing this weekend his support for a levy and Brown committed since November to an FTT.
The Financial Times put George Osborne’s commitment to a bank levy on the front page on Saturday – but relegated European coolness towards a bank levy to page 6. In fact, no senior politician has decided once and for all what to do. And we can do both – the US bank levy will raise chicken feed compared to even a 0.05% FTT, and an FTT would have other impacts (and uses) beyond just paying for the bank bailouts, such as paying for climate change measures, and making financial speculation more expensive.
Attempts to divide and rule should not be allowed to work. We can do it all.