Transaction Tax 'will send a signal' says EU Commissioner Barnier
Michel Barnier, the silver-haired Frenchman, spoke to The City in the ancient Guildhall in London. This talk, he will have known, was not to a friendly audience. Like so many of his fellow countrymen’s leaders, the talk took the form of an academic lecture with the audience being students who really didn’t understand the importance and the point of what he was saying. Very early on in his talk he nailed his flag to the mast with the statement that monetary union without economic union isn’t possible and that the EU had come to that conclusion ten years too late. (It was just a shame that the proponents of european monetary union hadn’t been listening to the many economists who at the time had said that to bring together countries into a single currency where their economies were developing at different paces was madness. You didn’t need to have a Ph.D in economics to work that out!).
Platitudes were said to calm the hostile crowd – the UK needs to be in the heart of Europe/Europe needs the UK and the UK needs Europe. He even went as far to say ‘There is no plot to undermine the City’.
On the question of David Cameron’s veto Monsieur Barnier was quite clear. If there was an exception made to protect the Financial Services sector, then another country would be asking for an exception to protect the automotive or mining or tourism. Strangely he didn’t mention agriculture.There could be no exceptions – there could be only one rule book.
His initial argument, during his lecture and before questions, for the Financial Transaction tax was that the banks had required state bailouts and that therefore the banks should pay for having those bailouts. He did not acknowledge that most of the banks that received state bail outs will not actually pay the FT tax and that most of the banks that will pay the FT tax did not receive state bail outs. Indeed over 70% of the FT tax will be paid by UK-based banks and with the French looking to exclude the tax on their bonds this percentage could rise even further. In a revealing Freudian slip, Monsieur Barnier stated that the FT tax will be imposed on the UK against its will. At the end of his lecture, realising what he had said and before questions he hastily re-stated that the FT tax will NOT be imposed on the UK against its will.
During the question and answer session he abandoned this argument when he had been challenged by a questionner that there was an industry that had received state bail outs for the last forty years and would he now introduce an agriculture tax? Needless to say this question was ducked and he complained why whenever he came to London did the question of agriculture always come up? (It couldn’t be anything to do with Britain being the major contributor to the Common Agriculture Policy could it?). His argument first shifted to the point that a transactions tax was not novel, that Hong Kong had one (and much lower other taxes) and the US had one too. He also argued that France, Spain and Germany were strongly supportive of the tax (well they would be as they will hardly pay any). In a final act of desperation he argued that public opinion was that bankers were paid too much and that this opinion was the driving force for the tax and that this ‘modest tax’ (even more modest when you don’t have to pay it and your competitors do) should be seen as sending a signal to the bankers.
With that, students educated, the EU Commissioner left The Guildhall to go to his next important meeting.