A Tobin tax (also known as a ‘Robin Hood Tax’) would be a fairer and more effective money-spinner than raising VAT. Such a tax was first suggested in 1971 by the American Keynesian economist, James Tobin, and was designed to slow down the volume of speculative currency dealing by traders—what Lord Turner has recently termed ‘socially useless’ activity. Although the idea was rejected by the Commission in 2002, much has changed since then; most particularly, currency speculation has risen by several orders of magnitude.
The Bank of International Settlements (BIS) estimates that in 2007 the world’s yearly currency transactions totalled US$800tr (that’s fifteen time world GDP or nearly a quadrillion dollars) of which 80% is purely speculative. Of this total, foreign exchange trade in euros is estimated to be worth nearly US$300tr (€220tr) per annum. A 0.1% tax on euro trading would raise over €200bn a year—and that’s based on a tax rate of £1 per £1000, one-tenth the rate originally proposed by Tobin, or roughly double the size of the EU budget.