David Prosser: Cameron and Osborne back the wrong side on the financial transactions tax

A tax on speculative investments that cause financial volatility? What’s not to like?
  • @davidprosserind

Outlook The City of London and the Church of England may have formed a fleeting alliance on the matter of the encampment at St Paul's, but they certainly do not see eye to eye over the financial transactions tax (FTT). The City's campaign against the introduction of such a tax will continue over the next 48 hours at the G20 summit in Cannes, where France and Germany plan to make the case for a new levy on the financial services sector.

The Archbishop of Canterbury's public backing yesterday for the FTT, often known as the Tobin tax (though the levy on the table today is quite different to the one proposed by the US economist James Tobin almost 40 years ago), will not worry the bankers too much. For they know that the authority figures who matter at the G20 – David Cameron and George Osborne – are in their camp. Both men refuse to sign up for a European Union-wide FTT.

The question is why? The Government's official position is that it is not opposed to the tax in principle, just to its introduction in the UK without a global consensus to impose the levy everywhere else – it fears a dulling of the City's competitive edge. Yet if lack of consensus is the only problem, why is the UK not heading to the G20 determined to persuade countries such as the US of the case for the tax?

A letter from the Chancellor to bank bosses, published yesterday, provides some clues. It makes it clear theGovernment intends to do nothing to advance the FTT's cause and that itexpects the proposal to be dropped in Europe in the absence of EU-wide agreement. Mr Osborne also appears to question the efficacy of a Tobin tax, a position that runs ahead of what the Government has said officially.

Neither the Prime Minister nor his Chancellor are especially keen to be seen siding with the banks just now. But it rather looks as if their public view differs from what they feel in private – that they would not want the FTT even if a global agreement for its introduction could be reached.

Still, the Government is mistaken if it thinks this problem is simply going to go away. Eurozone leaders made it clear yesterday they are minded tointroduce a levy within the single-currency bloc if EU-wide agreement proves impossible. Moreover, plotting in Brussels continues over the question of how the duty might be introduced in such a way as to require approval only from a majority of EU members. As the proposal stands right now, the UK has a right of veto.

That plotting concerns Andrew Tyrie, the chairman of the Treasury Select Committee, who yesterday wrote to the Chancellor asking, among other things, what steps Mr Osborne is taking to head off such a threat. There is anxiety in the City, too, which believes France and Germany may be able to implement the FTT as a form of VAT, which is a duty rather than a tax under EU law and thus does not require unanimous approval.

What's depressing about the campaign against the FTT is that if introduced globally, the tax has much going for it. The potential revenues – whether the money ends up in national treasuries' coffers or is spent on aid – are only part of the story. The thinking behind the original Tobin tax was that it would discourage the sort of speculative investment that was destabilising foreign-exchange markets in the years following the end of the Bretton Woods agreement. A tax on volatility-inducing speculative investment? What's not to like?

James Murdoch must stand down from BSkyB

BSkyB chairman James Murdoch may yet have cause to regret the fact that the company's annual general meeting takes place at the end of November, a month or two later than has been normal practice in recent years. There have been suggestions that the AGM was scheduled so late in the year in the hope that the furore over the phone-hacking affair might have quietened down by the time investors vote on Mr Murdoch's continuation in the role. If so, it is a ruse that has backfired.

The latest revelations concerning what Mr Murdoch was told and when about phone hacking have reignited the controversy and given MPs yet more sticks with which to beat him when he returns to the House of Commons Media Select Committee a week today. Even if he acquits himself well at that hearing, Mr Murdoch's position as chairman of Sky has become untenable.

By coincidence, the November issue of Management Today magazine hit the shops yesterday, and carries aninterview with Jeremy Darroch, the Sky chief executive. Mr Darroch's loyalty to his colleague and former boss – to whom he pledges his support – is to his credit, but does not sit easily with his great contention that the phone-hacking scandal is no threat to Sky's reputation. "We are a separate company," he says. "We have a common shareholder, but we're very different."

Not good enough. What Sky and News International also have in common is Mr Murdoch. Mr Darroch may be "clear about our standards and our behaviour" but his chairman standsaccused of falling some way short of those values.


Stress in the workplace: A timely reminder

One quick thought about the leave of absence taken by Antonio Horta-Osorio from running Lloyds Banking Group while he recovers from exhaustion: it is brave of him to go public about his illness, especially in an industry that has far too often been a standard-bearer for the "lunch is for wimps" philosophy.

It was pure coincidence that Lloyds made its announcement on a day that had been designated National Stress Awareness Day by a charity active in the field, but instructive nonetheless. Workplace stress is still not taken seriously by many companies: the lesson from Lloyds is that it is a very real issue.