Brown’s financial tax call falls flat
So keen is the British prime minister to airbrush out his decade as a “light touch” finance minister that he embraced the heretical idea of a levy on financial transactions as one way to make banks pay for future bail-outs — the so-called Tobin tax.
The idea was swiftly slapped down by the Americans and Canadians, although it enjoys warm support in Europe. But Brown’s Damascene conversion may have more to do with British politics than international finance.
Facing public fury over the tens of billions of pounds spent on bailing out British banks, Brown needs to reassert leadership on the global economy and show he is on the side of voters, not bankers, if he is to have any chance of averting likely defeat at a general election next year.
He and Conservative opposition leader David Cameron are vying with each other to sound more beastly towards the bankers — to the horror of the City of London, which opposes any form of tax on currency or derivatives trading.
The prime minister also hopes to rekindle the belief that his experience and judgment are sought after on the international stage. His call was warmly welcomed by France, which has campaigned for a tax on speculation to fund development aid.
The Tobin tax may have gained some respectability in Britain after the head of the Financial Services Authority, Adair Turner, advocated it as a way to slim down the bloated sector. However it will take more to convince the Americans.
Since any effective transaction tax would have to be levied in all financial centres to avoid evasion, a U.S. refusal could doom the idea, as Brown must have expected.
His Downing Street office has swiftly rowed back, saying the so-called Tobin tax was only one of four options he outlined, and highlighting instead the idea of an international agreement to make banks pay an insurance fee on risky trading.
This has more chance of drawing wide support, since the United States is already considering such ideas domestically and the IMF is working on proposals to be presented next April.
Voters won’t necessarily look at the fine print. So it is not far-fetched to think Brown was deliberately underlining a difference with the United States, in which he is on the side of taxing speculation, to rally his Labour Party’s faithful and go one-up on the Tories.
If some sort of global banking insurance levy does come about, Brown may claim at least a share of paternity. But his aura as a sage of global finance appears to be fading fast.