Altmeier should have been stuffed by Paxo

Newsnight this week had, for them, a reasonably balanced piece on the proposed EU transactions tax on Wednesday evening. There were some people in favour and some against before an interview between Jeremy Paxman and the German ruling party Chief whip, Peter Altmeier. However, in typical BBC style, the proponents of the tax were put forward as people who wished to tax the rich and help the poor and the opponents as people who were acting in their own self interest and believed that the tax simply could not work. Not only that, it was pitiful in its failure to dig down to the real issues – something, of course, which is a feature of its eurozone coverage.

Let us dissect the broadcast, which you can watch here. (The time of the references to each aspect is given if you wish to watch them again).

At 16:52, we are told that the UK has a responsibility to act in the interests of the EU as a whole (by a German politician) and not in the interests of the UK alone. Whether this is true is not something I am concerned with here. However, British self-interest was accepted as the basic premise of the case against a transactions tax. However, the opponents of the transaction tax believe it is a bad thing for any country or groups of countries that impose it. The fact that it hurts Britain most is unfortunate, but not the main issue. It is a bad tax for the EU! This issue was never pressed.

At 17:47 we are told that the Pope agrees with the transactions tax. This is simply untrue and is incredibly sloppy journalism. We have no idea what the Pope’s views are on the matter (understanding his general political philosophy, my suspicion is that, out of humility and an understanding of those things he knows he does not understand, he has no view on the matter). The idea was put out for discussion in a paper by the Justice and Peace Commission but it is quite possible that the Pope did not even read it before it was published – and if he did we will probably never know if he approved of it or not.

At 18:00 we had Max Lawson from the Robin Hood Tax campaign group tell us that it was great to tax casino banking to give the money to the poor. Good for him, he got his point over well. However, at no point in this long Newsnight piece, was there a discussion of who will bear the burden of this tax. It will be, of course, some combination of bank account holders, bank shareholders (future pensioners), savers who hold shares that are traded, and mortgage account holders whose mortgages are hedged in risk management processes, together with, perhaps, some rich bankers and hedge fund managers. The fact is that we have little idea where the burden of this tax will fall. Surely, this is a point that should be analysed on a programme such as Newsnight. Lawson said (and, again, all credit to him – he did his job well) that there was a two to one majority in favour of this tax. It all goes to show that the better you disguise a tax the more people favour it – this is not an especially moral position!

We then have the interview with Peter Altmeier (17:50) where Paxo was on very poor form. He started by asking Altmeier whether it had been estimated how much the tax would raise. He said “no” and suggested that discussions were just beginning. Paxo got the same answer to a question about how many jobs would be lost and then queried – but did not press when Altmeier moved on to a different issue – whether he was aware that the British government was saying that the European Commission suggested that 500,000 jobs would be lost.

A better briefed journalist would not have referred to George Osborne’s reference to an EC report, he would have thrown the facts from and implications of the EC report repeatedly at the interviewee: especially as the interviewee was from Europe and justifying an EU measure. For example:

  • There is an estimated fall in GDP 1.8 per cent as a result of the tax.

  • Given this, and after allowing for the fact that other taxes would be replaced (e.g. stamp duty on share sales) the net revenue will be negative!

As it happens, the estimate of 500,000 jobs lost comes not from the European Commission but from a separate EU report, but the point should still have been pressed. But this also just goes to show, journalists really should not use secondary sources – or at least not politician’s quotes of secondary sources. This is the second example in a single feature of a mistake being introduced into the discourse as a result of doing so.

Indeed, there is much discussion in the public domain about the very issues on which Altmeier majored. Altmeier suggested that the tax would lead to more proper primary trading and less high frequency trading. Unfortunately, because a primary trade is passed through a series of counterparties, a primary trade could end up being taxed at nine times the rate of a single high-frequency trade. There may be an answer to this point – but why was the point not pressed?

The case for a financial transactions tax is alarmingly weak. I feel quite sure that if this had been a free-market measure justified by an economic liberal, an interviewee would not have had the same easy ride.

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

4 thoughts on “Altmeier should have been stuffed by Paxo”

  1. Posted 18/11/2011 at 14:59 | Permalink has a vote on the tax; I propose voting no although the vote is a foregone conclusion.
    I’d point out that Robin Hood took money back from tax collectors gave it to those they oppressed. This is a Sheriff of Nottingham tax!

  2. Posted 18/11/2011 at 15:28 | Permalink

    You are right Philip. It is disappointing to see today that David Cameron has again said he favours such a tax if it could be imposed on a global scale. Even if everyone from the United States to North Korea imposed a FTT it would still be a very bad move.

    Interesting to look at the history of this proposal, which is now a million miles from the original Tobin idea. That was a Keynesian scheme intended to “throw sand in the wheels” of currency transactions in an environment where exchange rate instability was the perceived problem (just after Nixon had ended Bretton Woods). The money raised was to go the IMF to enable it to mitigate what Tobin expected to be a hugely unstable situation. He was wrong.

    Nowadays the tax is aimed at a much wider set of transactions, to deal with a completely different perceived problem, with the money paid into some as-yet-unexplained scheme to raise living standards in the Third World – despite fifty years of failure of large-scale international aid programmes.

  3. Posted 18/11/2011 at 18:39 | Permalink

    I might add that the Justice and Peace Commission did not even definitely propose the idea, it suggested that it might be reflected on. It is disappointing that Rowan Williams could not even get his facts right about this matter.

  4. Posted 19/11/2011 at 15:54 | Permalink


    I wrote an entire article about that vote on their website.

    I’m not sure that the outcome is a foregone conclusion. It is noteworthy that they have not published the results of the vote!

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