MPs call for sterling stamp duty to reduce poverty
According to a new report, a sterling stamp duty could generate upwards of £2.4bn a year towards international development funding - enough to fund basic healthcare in Ethiopia, Uganda and Tanzania for an entire year.
Tuesday 6 November 2007
The All Party Parliamentary Group (APPG) for Debt, Aid and Trade has today published a report, Meeting the Millenium Promise (PDF 201KB), backing an innovative approach to provide additional finance for international development.
Following an in-depth inquiry, the APPG concluded that the most efficient and timely proposal was the Sterling Stamp Duty (SSD). The APPG carried out the inquiry after recognition of the urgent need for new financial instruments to complement existing official aid budgets.
Jasmine Whitbread, Chief Executive of Save the Children, said:
"Children in poor countries can't wait for donors to increase their aid at the current pace; therefore we're looking to the UK government to lead the field in investigating new mechanisms for raising additional aid that can be spent now. If this proposed tiny levy on sterling transactions had been implemented this year, it would have raised almost £2.5bn - that's enough to fund basic healthcare in Ethiopia, Uganda and Tanzania for one year."
Despite the UK's strong track record in relation to debt relief and untying aid, enough is still not being done if we are to deliver the Millennium Development Goals (MDGs) by 2015.
The APPG recommended that the UK government undertake "rigorous research in an open and transparent manner into the implementation of a 0.005% stamp duty on all sterling foreign exchange transactions to provide additional revenue to help bridge the significant funding gap required to meeting the MDGs".
David Hillman, Co-ordinator of Stamp Out Poverty, said:
"We are delighted that a cross-party group of MPs has come out so strongly in favour of our proposal. Levying a tiny duty on sterling currency transactions has the potential to mobilise enormous sums of money every year to benefit people in poorer countries. Now we ask the Chancellor to listen to these MPs and introduce the Sterling Stamp Duty in the next budget."
The APPG report makes clear that any revenue that the UK or other countries raises from currency transaction development levies should be additional to aid already committed to reach the 0.7% target of Gross National Income for Overseas Development Assistance, and that the UK government should work with like-minded countries to research, develop and urgently implement new sources of development finance.
SSD implementation
The report states that the SSD could be easily implemented in the usual way - by announcing it in a Budget and enacting it through a finance bill. The report also says that London's status as the world's financial centre would not suffer as a result, and uses the example of share dealing having expanded in the City despite a 0.5% duty on stock transactions, a rate 100 times higher than the proposed SSD.
The report concludes that, despite predicted self-interest resistance from the City of London and the foreign exchange industry, the new tax would have no discernible negative impact on the UK economy as foreign exchange houses would absorb or pass on the duty as a small extra element to existing transaction costs.
As transactions are now electronic it would be easy to monitor and collect. The tax could also not be avoided by moving trade outside of the UK since the stamp duty would apply to all sterling transactions wherever they are traded in the world. All transactions would be identifiable even if they were in the form of derivatives or options.
Ann McKechin MP, Chair of the APPG, said:
"To be effective a Sterling Stamp Duty would have to be easily and inexpensively implemented, capture the vast majority of sterling transactions around the world, and be set at a level that would not lead to avoidance or cause any adverse effect to UK trade or the City of London. On the balance of the evidence provided to this Inquiry we believe that it passes these tests and should be actively considered by the UK government."
SSD pilot scheme
There is strong evidence that the levy would be relatively simple to implement, thanks to extensive computerisation of the industry and the regulatory systems in place to ensure financial stability. A case in point is the foreign exchange brokerage company INTL Global Currencies, who ran a week-long SSD pilot scheme in May 2007. It imposed a 0.005% levy on all currency transactions, raising several thousand pounds and encountering no technical issues.
Philip Smith, Director of INTL Global Currencies, said:
"With minimal impact on our profits, we were able to make a beneficial contribution to the lives of people in a poorer country. I'm not sure where the idea of this being technically complicated has come from. Our business is totally electronic and automated. To collect revenue we literally pressed a button - it was that easy. We anticipate a currency charge like this becoming law in the not too distant future and when it does we would expect companies to find it easy to comply with."
Further information:
- Stamp Out Poverty: Samantha Arditti on 07815 778 798 or David Hillman on 07951 725 878
- APPG: Ann McKechin MP, Chair of the APPG on 07751 482 722
- Save the Children: Ben Hewitt: 020 7012 6840
