Whose interests was Cameron defending when he resisted Merkel’s calls for a Tobin tax?
The Sunday Times’s undercover investigation into the ‘premier league’ of Conservative super-donors contains many explosive claims. Among the most telling is Peter Cruddas’ boast that he directly lobbied the prime minister against a Tobin tax ahead of a meeting with the German chancellor.
Cruddas, who resigned from his role as Conservative co-treasurer within hours of the investigation being published, is founder of spread betting firm CMC Markets, which would have been directly hit by the proposed tax of between 0.01% and 0.1% on financial transactions.
He is also a major Tory donor, having given £1.2m in party donations and support for the No2AV campaign; his wife and company have also donated thousands to the party coffers.
The City tycoon told the Sunday Times’s undercover reporters he had attended a party at Woburn Abbey and gained personal assurances from David Cameron on the tax.
‘I knew he was seeing [Angela] Merkel the next day, so when I’m having my photograph done I said, prime minister, for God’s sake, don’t let them bring in the Tobin tax where they tax financial transactions. He said, “Don’t even worry about it, don’t even think about it, it ain’t going to happen, not on my watch”. Thank you prime minister … Bosh. Off we go,’ Cruddas said.
Cameron has consistently opposed calls by European leaders to back the Tobin tax.
The Conservative Party openly sells face-to-face access to David Cameron and other senior figures through its Leaders Group, which offers those who donate over £50,000 opportunities to join the prime minister and Cabinet members at ‘dinners, post-PMQ lunches, drinks receptions, election result events and important campaign launches’.
Last year a major Bureau investigation into Tory party funding revealed that 101 individuals were eligible to attend such events – although as they are considered private, there was no way of knowing who had taken up the invitations, or what was discussed.
Still, the Bureau found a strong correlation between the interests of the City – the party’s biggest donors – and government policy.
And a former government minister told the Bureau most large donations were motivated by a desire to influence policy: ‘Most of them [donors] do not have a political bone in their body. They are completely apolitical. All they care about is their agenda.’
In opposition, David Cameron famously vowed to change ‘a system in which too much power is concentrated in the hands of the elite and denied to the man and woman on the street… I believe it’s time we shone the light of transparency on lobbying in our country and forced our politics to come clean about who is buying power and influence.’
The party has denied that big donations equate to high-level influence - but as the Sunday Times investigation confirms, behind closed doors the story remains very different.
Electoral Commission records show Cruddas, founder of spread betting company CMC Markets, has contributed over £800,000 directly to the party coffers, while his wife Fiona has donated a further £8,000 and an auction prize worth £2,653. In June 2011, as Cruddas was made co-treasurer of the Conservative Party, CMC Markets made a £100,000 donation. The party treasurer before Cruddas was Michael Spencer, chair of IPGL Ltd. This holding company owns City Index, another spread betting company, as well as the city’s most powerful inter-dealer broker. Spencer has contributed over £168,000 in cash, and a further £120,000 in travel expenses, auction prizes and sponsorships. IPGL Ltd itself is a generous supporter of the party: it has donated over £3.1m in cash since 2005, as well as over £290,000 in staff costs, £112,151 in sponsorships, £70,330 in travel costs and £3,584 in auction prizes, taking its total contribution to the Conservative Party to over £3.6m. Guido Fawkes has flagged up an interview with derivatives magazine Risk, in which Spencer claimed he too had received assurances on the Tobin tax from ‘very, very senior members of our administration’.
Spread betting’s support for the Tory party
The spread betting industry has long been generous to the Conservatives. In 2001, Stuart Wheeler, founder of pioneering spread betting company IG Index, gave £5m to the Conservatives in what remains the UK’s largest-ever single political donation.
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March 26th, 2012 at 6:29 pm (#)
I have always wondered why the Chancellor hasn’t brought financial spread betting taxation in line with CFDs and equities. It is the favourable UK tax regime,see below from Wikipedia, that has resulted in its popularity and profits for such firms as City Index, IG Group and CMC Markets.
Tax treatment
In the UK and some other European countries the profit from spread betting is free from tax. The UK and some other European countries tax authorities designate financial spread betting as gambling and not investing, meaning it is free from capital gains tax and stamp tax, despite the fact that its regulated as a financial product by the Financial Services Authority in the UK. Most traders are also not liable for Income Tax unless they rely solely on their profits from financial spread betting to support themselves. The popularity of financial spread betting in the UK and some other European countries, compared to trading other speculative financial instruments such as CFDs and futures is partly due to this tax advantage. However, this also means any losses cannot be offset against future earnings for tax calculations.
Conversely, in most other countries financial spread betting income is considered taxable. For example the Australian Tax Office issued a decision in March 2010 saying “Yes, the gains from financial spread betting are assessable income under section 6-5 or section 15-15 of the ITAA 1997″.[11] Similarly, any losses on the spread betting contracts are deductible. This has resulted in a much lower interest in financial spread betting in those countries.
March 26th, 2012 at 7:46 pm (#)
I wish investors and pensioners would receive assurances that the Tobin tax, Robbing Hood tax or Financial Transaction Tax will not happen.
EFAMA study finds that if the Euro FTT were in place for 2011, it would have cost investors and pensions an astounding €38 billion for UCITS alone.
Those employed want to be assured too. UK conducts 80pc of Europe’s financial activity. UK would pay 80pc of the following:
From the UK’s European Scrutiny Committee citing the European Commission’s 1223 page FTT Impact Assessment (even before the damaging relocation effects): a 3.43% fall in EU GDP equates to a fall in economic output worth €421 (£362) billion and a 0.34% fall in employment equates to a loss of 812,000 jobs.
The EU Commission brazenly announced the above study will soon be adulterated to deceive and show positive growth.
March 30th, 2012 at 12:34 pm (#)
@R.Rhun
Fortunately a Financial Transaction Tax (FTT) won’t affect citizens the way in which you suggest. An FTT would only apply to casino style trading, and this market is dominated by investment banks and hedge funds, not everyday high street banking.
Recent research on the impact of an FTT shows that in the long term an FTT would contribute to GDP by having a stabilizing effect on the market and reducing the risk of a future crisis, in contradiction to your suggestion that an FTT is a negative revenue tax. Economists Avinash Persaud and Stephanie Griffiths-Jones have shown that if designed properly this small tax could help rebalance the economy: http://robinhoodtax.org/sites/default/files/Financial%20Transaction%20Taxes%20-%20Griffith-Jones%20%26%20Persaud_0.pdf.
The European Commission report fails to take in to account that FTTs would help stabilise markets by deflating the recent boom in high-frequency trading. By reducing risk, FTTs could help bolster positive growth.
Growth means more than protecting the profits of the privileged few in the financial sector. An FTT would ensure the banks pay their fair share in the crisis, and encourage longer term stability in the financial sector while raising tens of billions of pounds to help those living in poverty in the UK and abroad.