The Government is aware that there is a strong lobby for the creation of a financial transactions tax (FTT) that would see a small fee imposed on trades in various financial asset classes to raise money to pay for overseas development assistance, climate change or to help tackle the current budget deficit. Foremost amongst these proponents has been The Robin Hood Tax campaign.
The Government also thinks that it is right for banks to make a contribution to the public purse. The International Monetary Fund (IMF) has recently published their report, A Fair and Substantial Contribution by the Financial Sector, which was commissioned by the G20.
The report endorses the type of bank levy model that the UK recently announced at its Emergency Budget on 22nd June and which the Chancellor has made clear will be implemented in the UK with effect from the beginning of next year. The Levy offers an effective way forward and ensures that banks make a contribution in respect of the risks they pose to the UK financial system and wider economy.
The report also endorses a Financial Activities Tax (FAT) levied on the sum of certain profits and remuneration in the financial sector. As announced in the Emergency Budget we are currently examining the costs and benefits of a FAT and will continue to work with international partners monitoring developments in this area. However, the report doesn’t offer an endorsement of a FTT and clearly there would need to be further discussion around whether the FTT model offers a stable and efficient mechanism.
The Government remains totally committed to the international development agenda. The UK remains on target to reach its international commitment for Overseas Development Assistance of 0.7% of Gross National Income, an important commitment for the Coalition Government.