Oxfam wants bank tax to save poor countries from financial disaster by Max Lawson 9:25am 26th Jul, 2010   Oxfam says a "Robin Hood tax" should be imposed on banks to help low-income nations fill huge budget holes.    The financial crisis has driven millions of people into poverty and put many more at risk as the world''s poorest countries scramble to fill huge budget holes with dwindling help from richer nations, according to Oxfam.    With the deadline for meeting the Millennium Development Goals (MDG) of slashing poverty just five years away, and aid budgets under pressure from the downturn, Oxfam is stressing the urgent need for new sources of help, such as a "Robin Hood tax" on financial transactions.    The charity is worried that much of the focus during and after the credit crunch has been on the fate of richer countries such as Greece, the US and Britain, while continued growth in emerging markets such as Brazil and India has been largely been taken as a sign the crisis was restricted to developed nations.    But its study of the budgets of 56 low-income countries, many of them in Africa, concludes that they too propped up their economies by borrowing in the earlier part of the crisis, and have now been left with gaping budget deficits.    "It is brutally unjust that the poorest people on earth are made to pay the price for bankers'''' greed through cuts in schools or life-saving medicines," said Max Lawson, spokesperson for the Robin Hood Tax Campaign and policy adviser at Oxfam. "A Robin Hood tax would make the banks foot the bill for the misery they have caused."    The first detailed analysis of the impact on poorer countries says revenues fell in almost two-thirds of them last year and for almost half, revenues will still be below 2008 levels by the end of 2010.    "Even if the rich world recovers, the crisis will still be wreaking havoc in the poorer countries," says the report, commissioned by Oxfam from Development Finance International.    The crisis created a "huge fiscal hole" of $65bn (£41bn), it adds, as budget revenues slumped by $53bn in 2009 – nearly a tenth of pre-crisis revenues – and by a further $12bn in 2010.    The report concludes that "because the international community''s response to the crisis had been so slow", low-income countries (LICs) have had to fill two-thirds of that fiscal hole by borrowing domestically – usually an expensive choice — or by running down reserves. That sparked deep spending cuts which have hit education and social protection, pensions, in particular.    The authors criticise the International Monetary Fund, which has backed many of the countries, for appearing to retreat to its "traditional position" and not providing enough flexibility on unwinding deficits without harming development spending. The countries with IMF programmes are highlighted as having done better so far on overall MDG spending but the body is slammed for its apparent lack of research into the area.    "Five years away from the deadline for reaching the Millennium Development Goals, it is scandalous that no international organisation is tracking MDG spending in the way that this report has done at the level of individual low-income countries," says the research.    "If these changes are not made, the fiscal hole caused by the crisis risks becoming a "black hole" into which the MDGs, and the lives and education of many of the world''s poorest citizens, will disappear."    As fiscally squeezed richer nations push through cuts to reduce their deficits and to protect their credibility in financial markets, aid budgets are coming under increasing scrutiny.    Oxfam and other anti-poverty campaigners are worried this comes in the hour of greatest need for many poor countries. "Recent trends in many donor countries have been to reduce aid pledges, concentrate aid on fewer countries, and focus on only a few of the MDGs," its report says.    It is urging world leaders to reverse this trend as soon as possible by signing up to "tough new aid targets"when they gather at a UN summit next month to discuss the MDGs.    They also want a tax on all financial transactions that some analysts estimate could raise $400bn a year, something the Oxfam report says would provide more than enough funds to reach the MDGs and combat climate change.    In its recommendations to low-income country governments, the report says they should fill the revenue hole by raising taxes on income and property, as well as on foreign investors. It argues that so far changes have mostly hit the poorest hardest because governments have been ushering in more indirect taxes on consumption and generally the poorest are consuming higher percentages of their earnings.    But there were some reassuring findings in the report. Health budgets have been largely protected. "Health has been the darling, and social protection the orphan. Infrastructure and agriculture have benefited from higher spending, but in many countries in 2010 this spending will be cut. Education has done particularly badly," it says. Visit the related web page
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