Darling defends PM's bank tax call

Published on Sunday 8 November 2009 21:40

CHANCELLOR Alistair Darling has defended Gordon Brown's call for a worldwide tax on financial transactions, despite the idea triggering a furious backlash from powerful allies such as the United States and International Monetary Fund.

Mr Darling said the Prime Minister had been right to suggest at the G20 summit in St Andrews that a "Tobin" tax be levied on financial transactions to pay for future bank bail outs.

He denied the idea had been a political stunt to please banker-hating voters in Britain.

Mr Darling said: "It's a question of fairness. I think there is broad agreement we should look at these things. They are not easy, they are not without their difficulties, but if you don't look at them, you won't know."

Mr Brown's speech on Saturday was met with embarrassing resistance within hours of his suggestion of the "Tobin tax", named after the Nobel-winning economist James Tobin.

The Prime Minister said it "cannot be acceptable" that banks enjoyed the profits when trades were successful but taxpayers had to pick up the costs of failures.

Within hours of his speech, a split developed across the G20.

US Treasury Secretary Timothy Geithner immediately rejected the idea, saying: "A day-by-day financial transaction tax is not something we are prepared to support."

Canadian finance minister Jim Flaherty was equally dismissive, saying that Canada was "not in the business of raising taxes, we are in the business of lowering taxes ... It is not an idea we would look at."

Dominic Strauss-Kahn, head of the IMF, said it was unlikely that the tax would be adopted.

Analysts predicted that France and Germany could support the plan.

Despite the opposition from the US, Mr Darling insisted yesterday that the America's Treasury chief Mr Geithner was in broad "agreement" with the principle of the tax.

"He is very clear that institutions rather than individuals should bear the cost of this," Mr Darling said.

"It wasn't just us – at the G20 in Pittsburgh, when we met under President Obama's chairmanship, we asked the IMF to look a these possibilities and come forward with proposals next year."

He added that the plan would not go ahead without international support, and said: "We have talked to the Americans, just as we have talked to others – there are other countries too that are interested in looking at this. I think people will quite rightly say you should be looking at how these institutions make a contribution in the future."

Mr Darling admitted: "I would have liked to have made a bit more progress, frankly."

He added: "It's not surprising that a month before a big conference you sometimes get people not willing to reveal their true positions."

The snub is a setback for Mr Brown who wanted to show he was tackling the irresponsible actions of bankers and mitigating the chances of a repeat near-collapse .