Although they pledged “full support” to the draft EU directive, the most interesting thing about this is that nine is the magic number of governments required to launch what’s called ‘enhanced cooperation’. This is a legal method of implementing a measure like an FTT without the unanimous support of the 27 EU member states required for an EU tax measure. So the nine governments calling for action at EU level are the nine governments who could, should such a measure fail to secure unanimity, go ahead anyway. The nine governments signing the letter are Austria, Belgium, Finland, France, Germany, Greece, Italy, Portugal and Spain.

The nine say that an FTT ”is necessary at Community level, both to ensure a fair contribution from the financial sector to the cost of the financial crisis, but also to improve the regulation of financial markets.”

NB: the quotes are TUC translations of the text of the letters as reported in Le Monde in French.

It’s all about Cameron’s ham-fisted attempt to opt out of EU regulation of the City of London. Many people have remarked upon his failed attempt to veto the Franco-German treaty proposal at the December European summit. Now, on top of the veto that wasn’t, here’s the opt-out that isn’t.

By refusing to take part in the Commission’s proposed financial transactions tax, Cameron thinks he has protected his pals in the City of London from paying the tax. But he hasn’t. All he will do by opting out is make sure that the British people don’t benefit from the tax when the rest of Europe goes ahead with it.

Here’s how it works. The Commission’s plan for an EU-wide financial transactions tax would raise about €57bn a year. Because London is where most of Europe’s financial transactions take place, about 75% of that tax revenue would be raised from transactions in the City of London. Cameron thinks that if the UK refuses to take part, those transactions won’t be taxed.

But Ernst & Young have ‘spotted’ what the Robin Hood Tax campaign has been arguing for some time. The way the Commission is designing the tax, the transactions which will be taxable won’t be just those that take place in countries taking part, but any transactions carried out where one of the parties to the transaction is based in a country where the tax is introduced. So if France and Germany levy the tax, and just one party to a financial transaction is Deutsche Bank or Bank Paribas, the euroFTT is payable, even if the actual transaction takes place in the so-called duty free City of London.

What Ernst & Young have added to the Robin Hood Tax campaign’s analysis – they are accountants after all – is that they have worked out what Cameron’s early morning diplomatic faux-pas will cost the UK taxpayer. They estimate that of the 75% of transactions that take place in London, 60% involve at least one party based in the rest of Europe. If the UK was involved in the EU tax, that would mean the City of London paying £35bn into the Treasury. If the UK doesn’t take part in the tax, the City of London will pay £21bn in tax – but none of it will end up in the UK Treasury, it will all go to other EU member states. London’s financial fat cats will indeed save £14bn, but at a huge cost to the UK taxpayer.

There’s only one answer. Cameron needs to go cap in hand back to Brussels, and ask if the UK can rejoin the Robin Hood team.

Welcoming the new report, Socialist MEP Anni Podimata, who will draft the European Parliament’s report on the Commission’s proposed FTT, said:

“This study confirms what we have been saying all along.  The financial markets have to make a fair contribution to the crisis they provoked. An FTT will reduce the fragmentation of the internal market. Put together with other tools, it will act as a disincentive to high frequency trading and other practices which increase risk without ensuring liquidity. This would contribute to a better financing of the real economy, encourage investment and job creation in the EU. The S&D Group is against putting the entire burden on ordinary taxpayers, and calls for measures to boost growth. In this sense, an FTT is an integral part of this approach.”

The Commission’s new approach was set out last week in a combative article in several national newspapers around Europe by EU Tax Commissioner Semeta - only a year ago an FTT-sceptic – who wrote:

The more the financial transaction tax approaches implementation, the shriller – hardly by chance – the rhetoric of its opponents. They twist the Commission’s official data and thereby invent apocalyptic scenarios concerning the impacts of the tax on growth, employment and competitiveness.

The FTT will neither damage growth and competitiveness nor lead to more unemployment. From an isolated perspective every tax causes economic costs. However, the costs of the FTT are small and, absolutely legitimate, given the enormous support the financial sector has been granted in the recent years. Furthermore, the costs have to be offset against the positive effects from the use of the revenues of the FTT.

The Griffth-Jones/Persuad paper also disproves the suggestion that an FTT would hit pension funds or pensions, and urges the European Commission to use the model of  the UK stamp duty to prevent evasion by forum-hopping, rather than the Commission’s current proposal of a ‘residence principle’.

“Growing inequality is attributed to several factors, including the reduced power of trade unions, the uneven distribution of the benefits of globalization, the growing disadvantage of marginalized groups such as young people, and inadequacies of institutional frameworks and policies such as redistributive policies” (para 9)

He urges Governments and international institutions to back the ILO Global Jobs Pact, extend social protection (eg disability benefits and pensions), offer youth jobs guarantees and take climate change mitigation action to reduce inequality and start reducing poverty again (global poverty was declining – albeit too slowly – before the financial crisis began, and has been thrown into reverse since).

There are any number of positive statements in the report, and it’s a pity the UK Government isn’t currently a member of the Commission. But do read the 18-page report – here are a few of the best quotes to get your appetite going:

“Progressive taxation, social transfers and increased access to social services, especially quality education, can counteract the trend towards growing inequality” (para 11)

“Labour market policies such as the provision of minimum wages and employment protection can be important tools for an equitable distribution of productive opportunities and inclusive growth. In countries that have managed to maintain relatively low unemployment since the crisis started, for instance, spending on labour market programmes at the start of the jobs crisis was higher than in those countries where the labour market has been hard-hit” (para 35)

“If economic growth is not associated with a move towards decent work, and away from the informal sector, growth will have an insignificant impact on poverty reduction. The ongoing cuts in social spending in a growing number of countries will only serve to increase vulnerability and working poverty” (para 36)

“macroeconomic and social policies that promote the creation of decent work and support stronger social protection are of critical importance. Investing in agriculture, rural development and climate change adaptation and mitigation measures are necessary to improve food security and reduce poverty. Crises also call for sustained and increased social spending. The trends towards  austerity in response to the debt crisis, if not reversed, will worsen inequality and exclusion and ultimately dampen prospects for economic recovery” (para 72)

Campaigners  – especially in India – are demanding that Dow take responsibility for the actions of the firm they bought, Union Carbide, in causing the terrible chemical disaster at Bhopal. The TUC has made clear to the London Organising Committee for the Olympic Games (LOCOG) that we share these concerns. Recently Meredith Alexander, the director for supply chains and behaviour change at the Commission for a Sustainable London 2012 and head of policy at Action Aid, resigned in protest. On Friday, CSL Chair Shaun McCarthy published a heartfelt statement which demonstrates the limites of the current approach.

CSL describes itself as “an independent body whose remit focuses solely on whether the London 2012 Games will deliver its commitments towards a sustainable games and legacy” – and as such, it felt that it didn’t have the power to reject the sponsorship deal with Dow. Their examination of the decision found that Dow’s plans for the stadium wrap were the most sustainable on offer, but that this in itself did not exonerate Dow and indeed reaised more questions than it answered:

“We found that Dow’s wrap was the most sustainable material on offer, but this does not mean we endorse any description of Dow as a sustainable organisation. We also found that LOCOG followed its agreed procedures when they selected Dow for the wrap but this does not mean, either, that we would endorse the use of these procedures in future. LOCOG followed accepted good industry practice, and we would argue strongly that industry good practice in this area is no longer good enough. The Commission hopes that the lessons learned as a result of London hosting the Games will represent a step change in how business will be done in the future.”

Shaun McCarthy’s conclusion is one we would totally endorse. He wrote:

“this experience makes it clear that [an] ‘ethics champion’ role will be necessary and we have already advised that future Olympic and Paralympic Games incorporate new rules to ensure that sponsorship is inexorably linked to Olympic and Paralympic values and ethical behaviour. We hope that this recommendation is adopted and will be pushing to ensure that it is.”

As the AFLCIO point out, the welcome recovery is still painfully slow, and at the current rate will not produce full employment until late in the decade (although recoveries tend to accelerate as people begin to go back to work because tax revenues increase, benefit expenditure falls and consumer demand grows all at the same time) . That reflects the weak stimulus which is all that the Democrats have managed to push through a Republican-dominated Congress, and the cuts in public sector employment of 276,000 forced on the President in 2011. But it does further demonstrate that there are alternatives to the headlong austerity being practiced in the UK and large parts of Europe. 

“I have said very clearly to other European leaders that there are ways of taxing financial services to make sure they make a fair contribution. We have stamp duty on share dealings. Other countries could do that.” (Emphasis added.) 

There’s always a limit to how much you can read responses to questioning at press conferences. But we’ve always argued that the UK stamp duty is a good example of an FTT that works, and that expanding the UK stamp duty to other countries would be a good first step. This was originally what the German Social Democrats called for in the last German federal elections, and it seems to be something that even Chancellor Merkel’s neoliberal coalition partners the FDP could sign up to. It is, roughly speaking, what President Sarkozy has suggested in France.

So this might be the beginnings of a consensus on a first step towards an EU-wide financial transactions tax which, while nowhere near as far as campaigners want to go, could give politicians the confidence to go further (it would raise only a few billion Euros – remember when billions sounded like a lot of money?)

For completeness, he also said some less complimentary things about the EU’s proposals for a financial transactions tax (see below). But the implication seems to be that if an FTT would not cost jobs, and if it could be designed so that people could not move their transactions to avoid the tax (ie if it was more like the UK’s stamp duty), he could support it. The Commission is shortly to publish a revised impact assessment which is likely to show that an FTT would not cost jobs (although we’ve always accepted it might move some around, eg from finance to public services and manufacturing), and is working with campaigners on how to design the tax so it can’t be avoided by moving jurisdictions.

“That is why I have been so clear about the financial transactions tax. If other countries want to put in place a financial transactions tax as originally envisaged by the European Commission, I know I used the word ‘mad’, but I do think it is an extraordinary thing to do. The European Commission has told us this would cost Europe half a million jobs. Now, when we are all fighting for jobs and for growth, to do something that would cost so many jobs does seem to me to be extraordinary. In the spirit of this healthy competition with France, if France goes for a financial transactions tax, then the door will be open. We will be able to welcome many more French banks, businesses and others to the UK and we will expand our economy in that way as well as by rebalancing it, because I think this is the wrong move.” ….

“The financial transactions tax, unless it is put everywhere in the world at the same time, simply drives those transactions to the jurisdiction that does not have it. That has been proven to be the case and that is why we think it is such a mistake.”

But it really is one very small step forwards, and seems to have the paw prints of a very cautious Finance Ministry all over it (although even so, the French finance industry is apparently appalled.) Here are the details that we understand so far (hat tip to Robin du Bois campaigners Khalil Elouardighi and Nicolas Mombrial):

• the tax is being spun as a precursor to a supposedly upcoming sub-EU Enhanced Cooperation Agreement on FTT later in 2012;
• the tax rate will be 0.1% (instead of UK 0.5%);
• the tax base will be transactions in shares of French companies with collection solely via Euroclear-France (ie excluding collection via LCH-Clearnet, Euronext, or foreign market infrastructures that yet process French instruments);
• it may be a tax on net transactions (whereas Stamp Duty is a tax on gross transactions);
• they’re contemplating exempting share transactions for market-making and own-account, just like UK already does (the TUC has called for this loophole in Stamp Duty to be closed, thus doubling the current £3bn revenue raised); and
• they’ve decided to exempt transactions in corporate bonds, sovereign bonds, foreign exchange, and all derivatives except options on French shares.

Sarkozy’s opponent Francois Hollande has been establishing his position as a more forthright critic of the banks and more committed to tax the rich, and this seems to confirm his portrayal of Sarkozy as soft on the people French citizens think caused the crisis and should pay for it. Linking the new tax to reforms of the French labour market to lengthen the working week hasn’t helped either!

Cameron is rebuilding bridges that he knows he was stupid to burn down in a small hours fit of pique last December, when he demanded no Treaty unless the City of London was ring-fenced like the inshore tax haven and regulation-free zone its senior bonus trouserers would like it to be – Liechtenstein-on-Thames, perhaps. He will no doubt try to portray his current position as an opt-out from the new Treaty which will not formally cover the UK, although, as Norway knows, if you’re part of Europe you are covered by the Treaties its members sign up to whether you have or not. The continental Robin Hood Tax would cover most of the financial transactions carried out in the City of London whether we’re in it or not (and you’ve got to be in it to get the tax revenue) and it’s likely that most of the financial regulation being proposed in Brussels will cover the City as well, Treaty or no, because it doesn’t need a new Treaty to legislate.

Cameron’s government actually agrees with the outcome of the Treaty – mandatory austerity, however the electorate votes – but he might not be so keen on the methods adopted to achieve it, such as Commission scrutiny of draft Budgets, European Court of Justice power to enforce deficit cutting, and balanced budget laws written in Brussels for implementation in every EU member state. These would clearly represent a loss in UK sovereignty, and trigger a referendum under the law that allowed Cameron to persuade eurosceptics to go into coalition with the supposedly pro-European Liberal Democrats. Cameron doesn’t want a referendum, so his veto that isn’t and opt-out that doesn’t is in fact a massive con-trick, allowing him to sidestep a dangerous referendum while still getting the mandatory austerity he wants to see.

Toxo’s union confederation, CCOO, has reiterated the need to address finance sector reforms and a determined fight against fraud. This would provide credit to households and SMEs and increase state revenues which could deliver an adequate level of public investment and quality public services, and thus contribute to economic recovery. At European level, the CCOO and UGT – the other main Spanish union confederation - have urged the European Council meeting starting shortly to promote a European plan to boost economic growth and employment, increase the time limits for compliance with the deficit and debt targets and approve the necessary tools to resolve the European financial crisis – such as Eurobonds.

Spanish unions have also just negotiated a Second Employment Agreement for the years 2012-2014 to avoid job losses by encouraging negotiations over flexible working to maintain employment instead of redundancy (what the unions wrily call “external flexibility”) and moderating wage demands. Unions maintain that, with this voluntary agreement, further reform as promised by the new Government is unnecessary.

On Thursday, public service employees staged a series of demonstrations across Spain to protest against unemployment and increasing austerity measures.

The GAC on Employment and Social Protection includes people you would expect to make these arguments – like Vice-Chair TUAC General Secretary John Evans, ITUC General Secretary Sharan Burrow and AFLCIO chief economist Ron Blackwell - as well as people who work in the global institutions already leaning this way like Stephen Pursey of the ILO and Prakash Loungani of the IMF. But it also includes academics like Zhang Xiulan from Beijing Normal University and Jose Antonio Ocampo from Columbia University in the US; and business representatives like Premkumar Seshadri of India’s HCL Technologies and Thero Setiloane from Business Leadership South Africa. So it’s a broad-based group.

Their five recommendations are, very briefly:

1. a coordinated growth stimulus to ensure employment remains a top priority, including slowing the pace of deficit reduction in countries with the fiscal space to do so (which would certainly include the UK);
2. immediate boosts to job creation and retention, such as youth employment promises and short-time working schemes;
3. using social protection to help stimulate growth;
4. establishing a social protection floor in developing countries, including cash transfers like Brazil’s Bolsa Familia; and
5. governments working on growth and social protection with other stakeholders such as unions, business and NGOs.

It’s not just the impact an FTT would have on their bonus income they’re worried about, though. As the increased focus of attention shone on the practices of the hedge fund industry by Mitt Romney’s stumbling campaign for the US Republican presidential nomination demonstrates, hedge fund managers have been making a mint out of management fees as well as the growth in the funds they manage: and it’s that management fee income that they are desperate to protect from a Robin Hood Tax.

This explains much of what hedge fund – and pension fund – managers have been saying about the impact of a Robin Hood Tax on pensions. Their working assumption is that current processes MUST NOT change. That pension funds will continue to pay high fees to the middle men (gender assignment not unintentional) every time they shift pension fund holdings around.

But there is little evidence, as Financial Times research reported today shows, that this constant recycling of fund holdings (whether the owners an individual or a pension fund) benefits the owners or the managers. Fund managers are also desperate not to take the hit on each individual management fee the charge for carrying out a transaction, and their assumption is that all the revenue raised by an FTT will be passed on to their clients.

An FTT would force fund owners, collective as well as individual, to re-examine the model that they are following. And it’s the model that fund managers are desperate to retain. But it’s not in the interests of us as pension fund members, and if an FTT was implemented without changing that model or at least sharing the tax payments, that would be exposed.

The ILO’s report is worth reading, because it paints a stark picture of a globa economy beginning to fall off a cliff. Things are already bad enough, it says, with global youth unemployment at 12.7%, three times the adult rate, 50% of women workers in vulnerable employment and 600 million new jobs needed over the next decade to meet growing populations.

But it predicts worse to come. Several indicators suggest capital is being eroded, and working people are disappearing from the labour market: 1% of the world’s 2.9 billion-strong workforce has simply dropped out of the figures during the crisis. The historic convergence of living standards across countries is slowing as inequality increases, and “high unemployment and low wage growth are reducing demand for goods and services”.

The ILO identifies two phases of the crisis so far: in phase one,

“the initial shock of the crisis was met by co-ordinated fiscal and monetary stimulus, which led to recovery in growth and avoided further contraction and higher unemployment, but proved insufficient to bring about sustainable jobs recovery… In the second stage, higher public deficits and sovereign debt problems led to increased austerity measures in an attempt to bring confidence to capital markets.

The tightening of policies and the persistently high levels of unemployment have increased the potential for a dangerous third stage, characterised by increased risk of a second dip in growth and employment in some of the advanced economies, exacerbating the severe labour market distress tha has emerged since the onset of the crisis.”

The ILO proposes a response based on globally co-ordinated regulation of the financial system, targeted stimulus measures to boost employment and encourage investment, “without putting fiscal stability at risk”, by raising taxes to pay for increased public expenditure, using the balanced-budget multiplier.

The statement is described as representing the personal views of the institutions’ leaders – no doubt because it is so far removed from the views of the Governments whose consent would be needed to make these views the official policy of the institutions.

It stresses the danger of ‘decelerating growth’ (by which we are presumably meant to read ‘imminent recession’ but without them copping the blame for talking down the economy), high unemployment (especially among young people), and the possible resort to protectionism. It calls for green growth, and explicitly supports “the work of the International Labour Organisation and others in assisting governments” to develop policies to tackle high levels of unemployment.

But there is no grand call for the Governments of the European Union, Canada or the legislature in the USA, to change course by abandoning austerity. And there is no call for the redistributive policies which even the OECD recognises would be needed to address the growing inequality in developed economies. That would require the rewards of productivity growth over the last ten to thirty years (depending on whether you are in Europe or the USA) to be passed on to the working people who delivered that growth, and a concomitant reduction in the wages, bonuses and dividends paid to the people who own and run multinational businesses – especially in the finance sector. Such a redistribution would allow personal debt to fall without damaging demand, and increasing wages could fuel the recovery that the developed world so badly needs.

Instead, there are circumlocutory calls that suggest measures to reduce public sector deficits should continue, the usual coded calls for labour market reform and efficient public sectors and the obligatory attacks on ”growth-destroying protectionism”, regardless of the lack of evidence that any such trend has emerged. The closest they come to charging the UK and other Governments with cutting too far or too fast, or in an unfair way, is to say that countries must “Manage fiscal consolidation to promote rather than reduce prospects for growth and employment. It should be applied in a socially responsible manner.”

This message, sadly, will not get through even though it was printed as a full page advert in Friday’s Financial Times. It needs repeating hour after hour at the meetings and cocktail parties in Davos this week, and it needs to become much more explicit.

Here’s a summary of what they should actually be telling world leaders, as brief as I can make it:

“Government austerity measures are destroying the prospects of growth, throwing millions on the dole – including a generation of young people – and adding to global poverty and inequality. Change course now to boost greener growth by investing in infrastructure, boosting quality public services and redistributing wealth by increasing taxes on the rich and raising wages for the working and middle classes.”

It’s certainly true that CRAs like Standard & Poor’s, Fitch and Moody’s perform what looks like a hugely important function – deciding, in global financial terms, who is up and who’s down – and that they do appear to have huge influence (but see below) on the markets, especially at the moment the market for sovereign debt.

But the way they influence behaviour is not by revealing hidden truths to markets previously unaware, for example, that Italy or Greece have debt problems. They do have a tendency to encourage herd-like responses in the markets which ever so slightly undermines the intelligent markets hypothesis (as intelligent as, say, sheep) and more seriously, promotes bubbles and crashes.

But the main way in which CRA ratings affect markets is that their pronouncements are built into the algorithms that govern the investment decisions of hugely wealthy financial institutions, so that if a CRA downgrades a certain country’s credit rating, large numbers of major investors will automatically race to what is perceived as a safer investment. So the markets are only as intelligent as zombie sheep!

This sometimes has unintended and farcical consequences. When the USA was downgraded last year, for instance, many algorithms snapped into action and fled to the world’s reserve currency, the dollar, with the result that the downgrading of the USA actually reduced its borrowing costs!

But the reason CRA ratings are built into these algorithms isn’t because they are assumed to be the product of financial genius. It’s because the institutions want to outsource the blame for any problems resulting from their investment decisions. “I totally misread the markets” is a worse excuse than “I was doing what the CRAs said I should do”, apparently.

The solution to the problem of CRAs, therefore, is to strip them out of the algorithms. Although frankly, I’d also stop them taking money from the institutions they rate, too.

Here is a whistlestop tour of some of the global features of what is rapidly becoming the common sense of the age about inequality, and what underpins the current – so far rather superficial – skirmishing between Labour and the Conservatives over ‘ethical capitalism’.

Inequality has been growing in some of the major world economies – developed, emerging and developing – although it has declined in a handful of countries like Brazil and South Korea. There appears to be no correlation between growth and equality: so the argument that growth automatically improves everyone’s living standards is false. Growing inequality is not an inevitable consequence of growth, development and so on, but depends on choices about how society is run: there are policy choices that increase equality or inequality. However, whilst growth does not inevitably produce either growing equality or inequality, there is mounting evidence that growing inequality leads to lower growth, and certainly played a major role in causing the global financial and economic crises.

So what are the solutions? Oxfam identify a number of measures that governments can impose: progressive tax and redistributive benefit systems; the provision of high quality public services; promotion of gender equality; and land reform. But Oxfam’s report missed out on measures which allow ordinary people to make a difference to their own lives: principally the freedom to join trade unions and bargain collectively.

But at least Oxfam are beginning to pose the right questions and identify the right problem – not so much poverty per se, as inequality. As Oxfam International begins to formulate its next strategic plan, maybe they need to take this debate further, and work out what development campaigners can do with trade unions to make sustainable change happen.

At the moment, the supporters of an FTT include four of the five biggest economies in the EU – France, Germany, Italy (Mario Monti has replaced Berlusconi’s generally sceptical position to one of clear support: he is reported to have studied under James Tobin) and Spain. Only the UK stands out from this group, and the UK Governmet’s claim that this is because the finance sector is so important to Britain looks less and less convincing given the combined weight of the financial sectors in the next four biggest markets (though the City of London is, to be fair, still bigger than the other four combined). France, Germany and Spain are all controlled by centre-right governments belonging to the EPP, which is the largest  bloc in the European Parliament (ahead of the Socialists and Democrats, also supporting an FTT) – but this group is the one David Cameron led the Conservative Party out of, a move that underpins the UK’s isolation in Europe.

Other long-term supporters of the tax include the Austrian government, Luxemburg converted to support fairly recently, and the new Belgian government is now re-confirmed as supportive despite a wobble when there wasn’t a Government there at all. The Danish Government is still in an interesting place, as they say! The Social Democrats and Socialists who form the majority of the coalition are supportive, but the Finance Minister comes from the hostile Social Liberals, and at present she holds the whip hand> However, her recent outspoken attacks on the tax have weakened her position inside the Danish Government, so change is still possible, especially as the tax gets closer to actual implementation. The Dutch are also in an ambiguous position, with the finance sector fighting back strongly against the Government’s support for an FTT. And the Czech Republic, Maltese and Swedes are still opposed.

As each new twist and turn in the announcement of positions – and the intricate detail of each pronouncement – is pored over, there will be ups and downs for the Robin Hood Tax campaign and its supporters. Electoral timetables, brinkmanship, bargaining positions all come into play, and it is important that supporters of the tax hold their nerve whenever a statement seems to go the wrong way. But as campaigners gather in London this week to map out this year’s campaign, it seems more and more clear that this year the Robin Hood Tax will turn from a campaign into law.

Apparently, Nigerians were duped into opposing the massive increases which resulted in the consequent doubling of prices right throughout the economy – basic goods, essential services, even medicines. Because in the long run, scrapping the Nigerian government petrol subsidy will create a better economy, releasing money currently creamed off by corruption for investment in basic infrastructure that cannot be prevented in any other way. Bizarrely, the people of Nigeria supported the unions’ call for a general strike. Maybe it’s because so many Nigerians exist on under £1.30 a day. If almost everything has doubled in price overnight, it’s not surprising poor people protest!

Paul Collier wrote that the last week had seen:

“a tidal wave of protest and disruption, forcing the government to negotiate with the unions” (my emphasis)

Unions have resisted attempts by successive Nigerian Governments to unilaterally remove the petrol subsidy, but have always been willing to negotiate the sort of action against corruption, investment in energy infrastructure and promotion of a better economy that would remove the need for the subsidy, so that it can, progressively, be reduced. Indeed, the Nigerian Government was in such negotiations before Christmas, about the gradual reduction of the subsidy. Then they walked away, and dropped the bombshell that sparked the protests.

Betrayed by successive political leaders whose families and friends have enriched themselves in office and done nothing to deal with the frequent demands to take action against the corruption in the oil industry which has left Nigerian infrastructure decaying and power unpredictable (so that almost every business needs a generator using that subsidised fuel), ordinary Nigerians – for some unfathomable reason – want to see some real progress on the challenges that their economy faces before they accept the promises that were all Nigerian President Goodluck Jonathan offered as he ramped up the cost of living by over 100%.

It is deeply insulting to suggest that ordinary Nigerians who manage to live their lives and raise their families are ‘economically illiterate’ as Paul Collier has suggested. I think they know more about practical economics than he does. And the people of Nigeria are better politicians, too, as they showed by forcing their political leaders to make the concessions that led to our brothers and sisters in the Nigerian unions to call off the General Strike just hours after Paul Collier’s forlorn appeal to economic orthodoxy appeared in the FT. You can read more about the successful actions of the NLC and NTUC over at Stronger Unions.

But the people arguing this case are often paid by precisely the financial bigwigs who will end up paying the FTT, so it’s not surprising that – as the FTT becomes ever more likely to be implemented – they are beginning to fling every argument they can get their hands on against the tax. And interestingly, they offer no suggestions for reforming the EU proposals to mitigate the shortcomings they identify in the draft Directive, because they don’t want a tax that would work, they want it scrapped altogether.

Right-wing conservative politicians have never been very happy about the tax (unlike centre-right politicians like Merkel and Sarkozy who have been among its strongest champions), because it restricts the freedom of financiers to invest however and whenever they feel they can make the most money: hands up, an FTT would restrict the freedom of very rich people to enrich themselves by engaging in what Lord Adair Turner, Chair of the Financial Services Authority, called “socially useless” activities. More recently, it has become clear that one of the things these rich financiers spend their money on is … right-wing conservative politicians! Hence David Cameron’s futile attempt to deploy the British Government veto in the service of his paymasters in the City of London.

It is politicians like this who have seized on the flawed European Commission impact assessment, which indicated that the proposed FTT might reduce economic activity in the EU by 0.5% to 1.76% over a twenty-year period, without quantifying the growth benefits that would come from using the extra tax revenues it would raise, or the potential benefits to be had from creating an incentive to invest long-term rather than gamble on the derivatives market. Even the European Commission accepts that its impact assessment is misleading. But to hear the opponents of an FTT complain about the reduction in growth that might, in the worst case analysis (they only ever use the upper figure, of course!), result over the next generation, you would not realise they are the same politicians who have discounted the impact on growth of the VAT increase or the slashing of public sector expenditure, currently doing such a wonderful job (where’s that heavy irony typeface when you need it?) for growth in Greece and Ireland – and the UK for that matter!

When it comes to the argument that an FTT would see financial markets leave the EU, or that it would hit pension funds and their pensioner beneficiaries, the naked self-interest of the FTT deniers becomes rather clearer. Most of the reports arguing this are from institutions run by or financed by the financial industry itself. They are the people who would actually end up paying the FTT, but as with any progressive tax reform, they oppose it because they say it would fall on the deserving instead (and again, they make no attempt to suggest how such a tax could be designed better to hit themselves in the pocket – what a surprise!)

But never fear – the arguments of FTT supporters seem to be bearing fruit with Commission officials, who have listened to our arguments against the way the current proposal is designed, and seem to be working up amendments that would address this problem – for example, making the EU FTT look more like the UK stamp duty, which does not allow evasion by moving to a different country. Adding that sort of provision to their already planned ‘residence principle’ would make it virtually impossible for anyone to evade the tax by moving country – unless they also gave up trading in products like currency, derivatives  and shares that are themselves derived from European economic and financial activity, and also trading with anyone based in the EU or working for an organisation based in the EU. And that would be extremely difficult.

Finally, the allegation that pensions and pensioners would suffer is based almost entirely on the twin ideas that pension funds currently engage in substantial amounts of high frequency trading and share portfolio turnover (they do a bit, but not to the extent that FTT deniers claim), and that the middlemen who currently make such a lot of money out of their activities would pass on all the costs of the FTT that they are asked to pay to the pension funds. The argument assumes that pension funds would blithely continue to operate as they do now, even if an FTT came in that made that less remunerative – and of course they wouldn’t. They would switch investment strategies to minimise the FTT they paid, and thus switch from short-term investment to long-term investment, which might be marginally less remunerative in the short-run, but would boost the economy long-term and thus produce bigger returns that would more than make up for the losses incurred. And as for the middlemen, well, I think pension funds might gently suggest that they bear the cost of the FTT out of their own deep pockets rather than insist on raiding pensioners’ pockets, or they might even find that these are people they can do without.

These are the very brief – and therefore not detailed – reasons why European politicians should not listen to the FTT deniers, but should spend time getting the EU FTT proposal right – just as we and the IMF have been arguing for months.

And it now seems that Sarkozy’s government is willing to go ahead unilaterally anyway, and earlier still. Francois Fillon – the Finance Minister – this morning indicated that a French tax could take effect by the end of the year, apparently reversing the position the French centre-right took in Parliament before Christmas in response to a call from the left-dominated Senate for a unilateral FTT.

This is no doubt all part of pre-Presidential election campaigning, but it’s a significant step forward, and taken together with German budgetary projections which already foresee such a tax in Germany (where most politicians also seem committed to a unilateral tax regardless of whether the tax is agreed more multilaterally), means that progress will be swift, especially given the switch by the new technocratic regime in Italy, who now strongly support a European FTT.

Where does that leave Britain and Cameron’s so-called veto?

Well first, it exposes the little-Englander rhetoric that described the EU FTT plans, before Christmas, as a ‘heat-seeking missile’ aimed at the City of London. Whilst the City is certainly the biggest venue for financial transactions in Europe, Germany and France have the second and third biggest exchanges respectively. So a Franco-German FTT would impact primarily their own finance sectors, not the UK’s. Sarkozy and Merkel are simply less beholden to their respective financial elites than the UK Conservative Party, who aren’t defending the UK economy or it’s finance sector so much as their friends in the City.

There is a more sophisticated concern, aired by peers when the TUC gave evidence to a Lords committee on the draft EU directive for an FTT before Christmas. Some peers were (more rationally) worried about how much of the tax would flow from the UK to Europe even if the UK didn’t take part, because transactions in London involving traders from countries where the tax was in force (eg a Deutsche Bank trader, even if based in London) would be taxed in Germany.

But there is a simple answer to this. If the Treasury doesn’t want a European FTT to lead to a net flow of tax revenue from the UK to other parts of Europe, they need to join in, so that all the tax receipts raised in London stay with the Exchequer, just as Stamp Duty receipts do now, wherever in the world shares in UK companies are traded.