Last week a development charity press office sought my support for a “Robin Hood tax”. The idea of the tax – “turning a crisis for the banks into an opportunity for the world” – is that “a tiny tax on bankers has the power to raise hundreds of billions every year” to “tackle poverty and climate change”. Well, I am a big fan of Robin Hood, no great fan of bankers and would like to tackle poverty and climate change. But the idea leaves me cold.
The tax is being backed by a large coalition of charities and fronted by Bill Nighy in a smooth marketing campaign. It's all in a good cause. But I have been appalled by the campaign's profound lack of curiosity as to whether this tax would be a good idea.
Start with the claim on the Robin Hood tax website that this is a “tiny tax on bankers … the people who caused this mess”. First, it's not a tax on bankers. It's a tax on financial transactions. And it's not necessarily tiny, because some worthwhile financial transactions have a very large face value, and a much smaller true value. For instance, I might buy car insurance which could – if I knocked somebody down and permanently disabled them – trigger a payment of £1m. My insurance company might want to reinsure that million-pound risk, a perfectly sensible, socially useful and non-speculative transaction. But at a “tiny” tax rate of 0.05 per cent, that's a £500 tax on a face value of £1m. It's hard to imagine such a tax wouldn't somehow affect my premium.