Currency Transaction Tax

At May’s Paris conference on innovative financing, I put back on the international agenda an old idea, proposed by the European Parliament in 2000, voted for by France in 2001 and supported by many non-governmental organisations. It is wholly relevant today: to fund development, we have to think about introducing a voluntary contribution based on international financial transactions.

On one side, there are vast needs. The Millennium Development Goals set in New York in 2000 remain a priority. Last November, at the United Nations conference on development financing, President Nicolas Sarkozy reiterated our commitment to them. By 2015 we have to eradicate extreme poverty and hunger, achieve universal primary education, increase gender equality, reduce child mortality, improve maternal health, combat major pandemics such as HIV/Aids, tuberculosis and malaria, ensure environmental sustainability and develop a global partnership for development.

To meet the health goals alone, we will have to find no less than $35bn (€24bn, £22bn) a year. Then, on top of the millennium goals, there are new demands to finance, in particular the fight against climate change.

The economic crisis is exacerbating the situation: according to the World Bank, a fall in growth of one percentage point means 20m more in poverty. Mortality of children under a year old could increase by 700,000 because of the slowdown. Official development assistance, which provided $119bn in 2008, cannot do everything, even though it remains an essential lever. The innovative financing mechanisms must act as a catalyst so that the millennium goals may one day become the millennium achievements.

Innovative financing mechanisms could also help us restore stability to the global economy. After the financial crisis that rocked the developed countries last autumn, a promising debate has opened on proposals ranging from caps on bonuses to tools to combat speculation and the economic and social turmoil it creates.

At Mr Sarkozy’s instigation, France is championing the vision of a fairer, more balanced globalisation. There is increasing global recognition of the need for this and we are encouraged by the fact that our British friends have joined us. I welcome the audacious analysis made by Lord Turner, chairman of the Financial Services Authority, who argues that the finance sector has become a destabilising factor in the economy and floats the idea of a tax on financial transactions.

It is up to us to display the same courage and ambition after the Group of 20 summit at Pittsburgh, from which we expect a great deal.

To the sceptics, I want to say that innovative financing is already a success: since the 2002 Monterrey conference, eight such mechanisms have been introduced. These have raised over $2bn and include, among others, the plane ticket levy launched on France’s initiative and today implemented in 13 countries, funding paediatric HIV/Aids treatment for 100,000 children every year; and the International Finance Facility for Immunisation, to which France is the second-largest contributor behind the UK, helping to vaccinate over 100m children worldwide.

In the wake of Mr Sarkozy’s appeal last November in Doha, this May’s meeting in Paris of the Leading Group on Solidarity Levies to Fund Development marked a milestone. France, a pioneering country, wants to go on proposing new ways to help the poorest people. We must use to our advantage the interdependence of the markets. Development financing can and must become a moral imperative.

The time has come for France, alongside the 58 Leading Group countries, to discuss the feasibility of a voluntary contribution at a low, non-distorting rate of 0.005 per cent. Let the financiers be reassured, this tax is painless: for a €1,000 transaction, 5 euro-cents would be diverted for the common good! Such a contribution can be conceived only if, under UN auspices, the international community deems it timely. Europe could pave the way for the discussion and decisions to come.

Such a tax would raise €30bn. This would finance new initiatives, particularly to help Africa. Its disbursement would have to be properly controlled and audited, in collaboration with the recipients. I have no doubt that the UN will one day adopt this system.

This autumn I will host a first ministerial meeting of the task force set up in May. Its purpose will be to assess, in the spirit of the 2004 report drawn up by Jean-Pierre Landau at the French finance ministry, the concrete terms and conditions for implementing this project and to propose alternatives for the political debate.

Innovative financing mechanisms are no longer merely an option. They have become necessary if we are to provide assistance to the world’s poorest people.