There are a few different names for this – a financial transactions tax (FTT), a Tobin tax or more commonly in the last couple of years a Robin Hood tax.
The Robin Hood of old stole from the rich to give to the poor, and his name has been appropriated for a tax that would take from the banks and give to the people, a reversal of the fiscal policy of austerity where the people have given to the banks, and continue to pay for the crisis they caused.
An FTT would put a small amount of tax on risky financial transactions. A tax of 0.05% would raise £20bn each year in the UK, and around £125bn globally – and it would want to be implemented globally (or at least in all the major financial centres of the world), since these are electronic transactions, it would be relatively simple to route them through areas without a tax.
The tax would not cover day to day banking transactions like direct debits or cheques, but would only be placed on the types of transactions made by the casino banks, hedge funds and insurance companies that engineered the conditions for the credit crunch and financial collapse of 2008.
Alongside raising money for the treasury, this could also help to reduce the incentive to taking the risks that investments banks were taking prior to the 2008 collapse, because it would reduce the pay-off from these gambles, making safer investments more attractive.
This time of year we hear the level of profits and bonuses being paid to bankers, from RBS’ boss being forced to relinquish £1m, to the £5.9bn of profit made at Barclays (with around £1.5bn of bonuses being paid to employees), we see banks and bankers making healthy profits, whilst we continue to pay the price for their mistakes.
The £20bn raised from a tax on the riskiest transactions would be equivalent to 25% of the amount the coalition are seeking to cut from government spending over 4 years- it would negate the need for all the cuts to be made in 2012. No need to slash welfare budgets, meaning that people with disabilities could continue to receive the care and support they need; no need to cut spending on the NHS, meaning that 300 hospital beds due to be cut in Birmingham could remain available; no need to cut spending at Birmingham City Council, retaining around 7,000 jobs at a time when unemployemnt in Birmingham is over 10%.
Much more information about a Robin Hood tax can be found here, on the Robin Hood Tax campaign website. More information about other alternatives to cuts can be found on our alternatives page. Whenever someone tells you that there is no alternative, make sure you have the knowledge to explain to them how we could handle this situation differently, and why austerity is not the best option.