'Time to consider global tax'

2009-11-07 20:06

Scotland - Britain called for consideration of a global tax on financial transactions to insure against another crisis, and urged world finance officials meeting on Saturday in Scotland to agree on bearing the cost of fighting climate change.

British Prime Minister Gordon Brown told finance ministers from the Group of 20 rich and developing countries it was time to consider a global financial levy, such as a tax on transactions or an insurance fee, that could support a "resolution fund" that could serve as a buffer against future bailouts.

In its last meeting as chair of the Group of 20 before South Korea takes over next year, Britain is attempting to push through discussion of issues it views as critical to future world economic growth.

Brown superseded his Treasury chief Alistair Darling to address officials directly, saying it was time to consider whether banks needed "a better economic and social contract" that reflected their responsibilities to society.

But he said Britain would not act alone in imposing any tax, and that any measures must be implemented by all major financial centres. Britain, the US, Germany and other countries have spent hundreds of billions of dollars in taxpayer money to rescue financial companies that suffered heavy losses from risky investments.

Brown's comments bolster earlier calls from former German Finance Minister Peer Steinbrueck for a global tax on all cross-border financial transactions.

Critics argue that measures such as the so-called Tobin tax - a flat tax on currency transactions named after the Nobel Prize laureate James Tobin - would just dry up world financial flows. Supporters suggest the money could be used to protect countries from spillovers of financial crises.

Money to battle climate change

The money could also be used to assist poorer countries in the battle against climate change - another issue being pushed by Britain at the gathering in the university and golfing town of St Andrews in northeast Scotland.

Darling urged the officials to reach an agreement on bearing the cost of fighting climate change before a UN summit on global warming next month.

Darling said officials need to agree on a finance package to help poorer nations develop green industries and adapt to climate change.

"I think that it really is imperative that when we reach the end of the day, that we have shown that we have made some real progress in dealing with what is a very real and urgent problem now," Darling said. "We will do everything that we can to reach that agreement in advance of the Copenhagen meeting."

There have been disagreements about which forum was the most appropriate place to discuss funding to fight climate change.

The push to put it on the agenda here reflects concern that nations will fail to agree in Copenhagen on December 6 on a successor to the Kyoto treaty limiting carbon emissions.

"It really is important ... that we as finance ministers are engaged in this, because if there isn't an agreement on finance ... then the Copenhagen agreement is going to be much much more difficult," he said. The G20 represents around 90% of the world's wealth, 80% of world trade, and two-thirds of the world's population.

The EU has said that there should be a 100 billion annual package of public and private finance by 2020 and has urged the US to lay out its position.

Finance ministers hold key

But the Obama administration has been preoccupied with prickly domestic issues such as health care.

Danish Prime Minister Lars Loekke Rasmussen said it was now "obvious" that the December climate change talks "can't achieve the final result in terms of the new legally binding treaty which goes into all details".

But he said finance ministers held the key to a final deal, urging them to come up with concrete proposals on funding to help developing nations tackle and cope with a warming climate.

In a speech to the G20 meeting, he called on officials to set up a global climate fund that "should be ready to work immediately." He also asked them to keep an open mind on raising funds from new areas such as a global cap-and-trade programme for air and sea travel.

The climate issue has been the focus of protests around St Andrews. A small group of protesters blocked the coastal road on Friday night between the town and the nearby resort where the meeting was held by chaining themselves together. On Saturday around 200 demonstrators gathered at West Sands beach with a group dressed as bankers sticking their heads in the sand.

There are also divisions among officials over attempts to secure future global growth.

Host country Britain, still mired in recession, is keen to continued international effort to support a still fledging recovery, while other G20 nations, including the United States, Japan and Germany, want to debate ending measures to boost growth.

The finance ministers and central bankers are trying to find a way to make good on a pledge by world leaders at their September summit in Pittsburgh to subject their economic policies to the scrutiny of a peer review. That process would determine whether each country's efforts were "collectively consistent" with sustainable global growth.

The goal is to avoid repeating problems like huge trade deficits and credit-fuelled consumption in the US, and massive trade surpluses and savings in China and elsewhere. China's appetite to fund US debt by buying Treasuries was seen as playing a major role in fueling the US housing boom and subsequent collapse.

The G20 is comprised of Argentina, Australia, Brazil, Britain, Canada, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the rotating EU presidency.

- AP