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Shadow Chancellor returns to Birkbeck to announce new policy

John McDonnell, who completed his Master’s degree in Politics and Sociology at Birkbeck, returned to Bloomsbury to announce his party’s adoption of the Financial Transactions Tax.

John McDonnell pictured with David Hillman, Director of Stamp Out Poverty.
Rt Hon John McDonnell MP pictured with David Hillman, Director of Stamp Out Poverty.

The cost of the bank bailouts following the 2008 financial crisis is estimated at seven trillion dollars. Yet little has been done since then to mitigate the risks of a future crash, or to reimburse the public purse for the loss.

In Making the UK A Citadel of Long-Term Finance: A Comprehensive Financial Transactions Tax Proposal, a joint discussion between the Progressive Economy Forum (PEF) and Stamp Out Poverty, eminent economists and academics, among them Labour’s Shadow Chancellor and Birkbeck alum John McDonnell, set out proposals for how the volatility of the financial sector may be addressed in a way that benefits society.

The event was hosted by Birkbeck's School of Business, Economics and Informatics with an introduction from Dr Sue Konzelmann, member of the PEF Council and Reader in Management.

The Financial Transaction Tax (FTT), also known as the Robin Hood Tax, is a small charge on the purchase of financial assets like shares, bonds and derivatives. These transactions are largely carried out by the banks as opposed to individuals.

Professor Avinash Persaud, Chairman of Intelligence Capital and former Global Head of Currency and Commodity Research at JP Morgan, highlighted two major benefits of the policy: raising capital to invest in UK skills and public services and changing behaviour in the financial sector to reduce the risk of future crises.

“I used to believe the world of finance existed in cyber space and that there was no way to control it, but finance is not anonymous,” he said. “They like to say no one predicted the crash of 2008, but that’s a common urban myth. The banks pushed themselves towards catastrophe by creating policies that sanctified fast finance. The game of finance became how to be the first one to leave the room when the going gets tough.”

Professor Persaud listed a number of examples of instances for which the UK financial sector is not currently fit for purpose, Brexit and climate change being the most pressing, arguing that we need ready capital to be able to cope with unforeseen losses.

However, he stressed that the purpose of the FTT was not to put a stop to trading, saying: “I am in favour of balance. We need traders, but we also need investors to think about the future.”

Also on the panel were Professor Stephanie Griffith-Jones, member of the PEF Council, and David Hillman, Director of Stamp Out Poverty, who echoed the need for future investment for a thriving economy.

Arguing that the financial sector “should not be a bad master, but a good servant,” Professor Griffith-Jones said: “If we want a financial sector that serves the economy, it has to be long term. Bankers will also feel better about themselves, as they will be contributing to a better economy.”

David Hillman stressed that, on the basis of research conducted by the PEF, reorientation of financial activity through the FTT would release £35 billion over a five-year parliament. These are funds that the Shadow Chancellor pledged to use to tackle climate change, the “grotesque levels of inequality” in the UK, and the quality of life for its citizens.

McDonnell said: “We are the fifth largest economy in the world, but we can’t feed our people, can’t house them, can’t care for them. We need long term, large-scale investment in our economy and society.”

The Labour Party is in the process of consulting on their manifesto and will be adopting the FTT as a policy in the next general election.

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