Brown calls for global ‘economic and social contract’

November 7, 2009 by Infowars Ireland

www.breakingnews.ie

Gordon Brown today called for a new global “economic and social contract” with the financial institutions to ensure taxpayers around the world would never again have to bear the cost of banking failure.

Addressing the meeting of G20 finance ministers in St Andrews, the British Prime Minister said that in future there must be a “just distribution of risks and rewards”.

“I believe we should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society,” he said.

“This is a unique sector that, when it fails, imposes such a high cost to the wider economy and damage to society that government intervention becomes essential. So the taxpayer had no real choice but to step in to keep the system afloat.

“And it cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us.

“There must be a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards.”

From the BBC…

He also said it was “essential” there was progress on funding climate change.

…Mr Brown repeatedly stressed the need for “global” action on reforming the world’s banking system.

He insisted: “Britain will not move unless others move with us.”

Mr Brown admitted there would be “enormous and difficult practical and technical issues” but a “better social contract” was needed with banking systems to make them more responsible.

He said it could be funded in a number of ways, including a global levy on transactions.

Other options, he said, were an insurance scheme, a global “resolution fund” or a contingent capital arrangement.

The UK has in the past been opposed to transaction levies, known as Tobin taxes, believing they could damage the interests of the City of London.

The BBC’s Joe Lynam, in Saint Andrews, says Mr Brown’s calling for an insurance levy or transaction tax is the verbal equivalent of a cruise missile being thrown into the debate.

The call took many delegates by surprise, and sources close to the Canadian and American delegations suggest their response could be lukewarm, our correspondent says.

The British Bankers’ Association quickly cast doubt on the effectiveness of such financial transaction levies.

Chief executive Angela Knight said: “[They] don’t work as they require perfect or near-perfect global implementation.” Read more…

From the Daily Telegraph (UK)…

G20: Gordon Brown calls for global tax on financial transactions

Gordon Brown has called for a global tax on financial transactions to prevent future bank bail-outs as G20 leaders meet in Scotland to discuss the economy and climate change.

The Prime Minister told ministers from the group of rich and developing countries it was time to consider a global financial levy or an insurance fee to be implement by all the world’s financial centres.

Addressing the meeting in St Andrews, he said there must be a ”just distribution of risks and rewards”.

”I believe we should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society,” he said.

”This is a unique sector that, when it fails, imposes such a high cost to the wider economy and damage to society that government intervention becomes essential. So the taxpayer had no real choice but to step in to keep the system afloat.

”And it cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us.”

His comments follow earlier calls from former German Finance Minister Peer Steinbruck 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.

Mr Brown said the move could be achieved through an insurance fee to reflect systemic risk, a special “resolution fund”, contingent capital arrangements, or a global levy on financial transactions – a so-called “Tobin tax”.

He stressed that in order to work, the measures would have to be implemented by all the major financial centres around the world – including the US, Europe, Asia, the Middle East and Switzerland.

“Let me be clear: Britain will not move unless others move with us together,” he said. Read more…