Nighy's Tobin Tax a disaster for London, says think-tank
Adam Smith Institute claims Tobin tax would lead to greater volatility and more unemployment
ACTOR Bill Nighy has managed very well in taking his campaign for the Robin Hood tax to Cannes on behalf of Oxfam. He has successfully batted off any number of City pundits and TV hosts throwing awkward questions at him, and with Nicolas Sarkozy, Angela Merkel and the Archbishop of Canterbury backing a financial transactions tax, he has the wind behind him.
But how will he answer the new evidence from the leading free market think-tank, the Adam Smith Institute, that London will be "hung out to dry" if the tax is implemented?
The ASI says the Robin Hood tax – better known in City circles as the Tobin Tax or FTT (Financial Transaction Tax) – would cost the UK economy an "eye watering" £25.5bn over the next 20 years. This is hugely disproportionate in European terms because London accounts for 74.4 per cent of the interest rate derivatives market in Europe.
Sam Bowman, co-author of the ASI report, quoted by London Loves Business, says: "This report reveals the huge damage that a Financial Transaction Tax would cause to the UK. It would wipe out London's derivatives sector, destroying jobs and driving other traders overseas.
"By destroying a critical part of Britain's most lucrative industry, an EU Financial Transaction Tax would be killing the goose that lays the golden eggs."
City AM makes the point the European Commission is backing the implementation of the tax, arguing that "the financial sector should contribute more fairly given the costs of dealing with the crisis and the current under-taxation of the sector".
However, the ASI says it is ordinary companies and mortgage-holders who will suffer. That's because "derivatives markets allow the discovery of the appropriate interest rate for fixed rate mortgages" and that "without them, there would be less precision and more difficulty for mortgage providers wanting to offer fixed rate contracts."
One puzzle remains – and Nighy might find it useful ammunition: the Adam Smith Institute has based its figures on a 0.1 per cent Tobin tax on shares and bonds trades. Yet the actor and other advocates of the tax have always quoted a rate of 0.05 per cent. Over to you, Bill. ·
