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Speech by David Hillman, Stamp Out Poverty Coordinator
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The International Workshop on Innovative Financing Mechanisms for Development
Oslo, Norway
5 December 2006
At the outset, I’d like to thank the Norwegian Ministry of Foreign Affairs for all their efforts to arrange this Experts’ meeting and say that I am delighted on behalf of Stamp Out Poverty to have the opportunity to address you and talk about our paper; Taking the Next Step, which makes the case for a currency transaction development levy – CTDL . I hope through this presentation to show why the CTDL is such a strong idea, why it works in today’s financial world and why it needs to be piloted now.
Firstly, why do we need a 2nd development levy and how could this finance be effectively spent?
In the same way as the first international development levy – UNITAID – addresses a weak-spot in the current development effort, in that it is not principally to add extra money to purchase more drugs to combat HIV/AIDS, TB and malaria, but more importantly to drive down the price of drug treatments - so transforming a situation of high cost drugs to the few to one of low cost drugs for the many – so our approach (as set out in section 4 of the paper) is that revenue from the CTDL needs to be spent in a similarly strategic way, where considerable extra benefit is achieved, in addressing several seemingly unrelated Development Goals.
In the paper we propose the following potential avenues for the use of CTDL revenue:
• firstly, to considerably increase finance for clean water and sanitation,
• secondly, to greatly increase the provision of health workers necessary for the delivery of treatment to people with HIV/AIDS, TB and malaria, and
• thirdly, to provide substantially increased finance for an expanded UN Central Emergency Relief Fund (which has been set up to respond to disasters such as floods, earthquakes and famine).
All three avenues are strategically important development interventions. Let me use the example of clean water and sanitation (since time forbids going in to all three) to describe what we mean by a ‘strategic’ intervention that affords progress on a number of ‘seemingly unrelated development goals’.
With clean water and sanitation – Goal 7 – let us be clear about the size of the problem and its impact on other Millennium Development Goals (MDGs).
Currently, 1.1 billion people still lack access to safe water and 2.6 billion, 1 in 3 people on earth, do not have access to something as basic as a toilet. It is urgent to recognise the daily impact that a lack of water and sanitation has on people’s lives, which in turn has a profound impact on attempts to meet the other MDG targets. To give some examples: currently 6,000 children die every day from diarrhoeal diseases, so Goal 4 on reducing child mortality will not be met unless more children are drinking safe water and living in more hygienic environments. More than half of all the hospital beds in the world are filled with people suffering from water-related diseases, so Goal 6 on reducing disease in developing countries will not be met if precious resources are being spent on treating people with easily preventable illnesses. And lastly, 443 million school days are lost worldwide annually due to diarrhoeal disease so Goal 2, to achieve universal access to education, will mean nothing if children are too sick, or too busy collecting water, to attend school.
I hope that this clearly shows not just how acute the clean water and sanitation problem is, and how urgent it is to intervene with everyday literally costing lives, but more so, that financing here is strategic to building the necessary infrastructure for a holistic approach to meeting the MDGs.
Secondly, I would like to address the feasibility of the CTDL proposal. Taxes on financial transactions, far from being unusual, are in fact commonplace: witness in the UK the 0.5% stamp duty on share transactions; in South America, many countries such as Argentina, Brazil and Colombia employ such levies to fund their general expenditure. Indeed what is strange is that currency transactions have to date remained exempt from taxation.
Further, and very important to bear in mind, is:
• the revolution in electronic messaging and computer technology,
• the need for real time settlement of transactions to avoid settlement risk, and
• the increasing centralisation of the market.
All these factors have combined to make the CTDL now technically feasible. The fact that a specialist in the field of foreign exchange such as Avinash Persaud – a former senior manager of currency trading at major financial firm, J P Morgan - is here today to give expert testament to the feasibility of the proposal is an important signal that it is no longer a question of if this market can be taxed, but when.
Our paper clearly shows that the CTDL is technologically easy to implement, inexpensive to collect and, at the low rate proposed, uneconomic to avoid. It will skim the market without affecting the way it operates and generate considerable revenue. The issue is no longer one of feasibility but rather of desirability and political will. I think everyone here agrees it is desirable to add further complementary income streams for development. The key question is whether there is sufficient political appetite for a country to implement the CTDL.
Thirdly, I would like to relate a story to you. I recall a previous time I was in Oslo, I was working in the campaign against landmines, as coordinator of the UK section of the International Campaign to Ban Landmines (the ICBL). In 1997 we were awarded the Nobel Peace Prize (that is, it was awarded to the ICBL and our international Coordinator, Jody Williams) and I had the honour to attend as the UK representative of the campaign. At the event I befriended an amazing Cambodian guy called Tun Channareth. Reth, as he was known, had lost both his legs to a landmine and had become this extraordinary international advocate for the banning of landmines. We were chatting in the bar at the hotel after the ceremony when he suddenly remembered that he was supposed to be addressing a crowd in a nearby square and that he had to go immediately. We got outside as rapidly as we could, he was in his wheelchair, there was a light sprinkling of snow on the ground, and we asked for directions. Someone told us ‘you go up about 3 blocks, then across about 4 blocks’ and I said to him ‘look I’ll rush on ahead and tell them you’re coming along behind me’. I remember him looking at me quizzically before pushing down hard on his wheels and shooting off up the road leaving me standing there like a lemon thinking ‘what are you nuts, there’s no way that you’re quicker than him, he’s on wheels!’
I share this story with you for a reason (a couple of reasons really). Firstly, I had made an assumption (an incorrect assumption as it turned out) that I would be quicker than a person in a wheelchair. Now Reth may have been less-able bodied than me but he was a lot quicker. So I ask you, don’t assume just because this idea of a CTDL hasn’t happened yet, that it can’t happen and that it can’t happen quickly if a country chooses to implement it.
Secondly, as I stood there watching the wheelchair disappear out of sight, I experienced an important realisation. I realised that, despite my experience in this field, Reth was far more able than I had given him credit for. And what had just happened had altered how I held disability, and how I conceived of people with disabilities. So I ask you to consider one of the key purposes of today’s Expert’s meeting, which is by listening to specialists such as Lieven Denys, Rodney Schmidt and Avinash Persaud, that it engenders in you a realisation (and I address myself most especially to those of you who have hitherto been unconvinced) that the CTDL can clearly now be implemented, and instituted quickly and without difficulty.
Finally, I turn to our hosts, to the Government of Norway. You are a champion in the field of development assistance - I recall the great work of Norwegian People’s Aid in respect of landmines - and the fact that you reached the 0.7% Official Development Assistance target so many years ago. The eyes of the South and the NGO community turn to you, to your courage and leadership. We ask you to rise to the historic challenge, to follow France’s lead with UNITAID, and pilot the 2nd development levy, and bring the CTDL, we describe, to the world.
Thank you for listening.
In answer to questions to the panel:
1) On the feasibility of the CTDL proposal:
“I have to ask you - after hearing words from leading experts in the fields of law, finance and academia, all asserting categorically the feasibility of the proposal - do you seriously believe that a Government couldn’t implement a levy on transactions of its own currency if it chose to do so?
I’m going to pause here. I want you to think about that. Do you seriously think they couldn’t implement this if they wanted to? Of course, they could.”
2) In answer to a question on the urgency of new development finance (and the final intervention before the Chair’s summing up):
‘I’d like to bring us back to the kind of differences on the ground we need to accelerate now and quote, Andy Atkins, Advocacy Director of TearFund (a development charity and member of Stamp Out Poverty) from a speech to a fringe meeting at this year’s Labour Party conference:
“Let me conclude then by suggesting that water and sanitation has suffered the fate of many things that are obvious but unglamorous and sometimes taboo. Because the need is obvious, it is hardly mentioned. Because it is hardly mentioned it is taken for granted. Because it is taken for granted it ends up being overlooked. But to overlook this, is to hold back progress on most everything else. Unless the international development community starts restating what should be obvious, that we need to scale up our ambition to resource water and sanitation services for poor people, we will not achieve many of the MDGs. It would be an unspeakable tragedy if so much global commitment to overcoming poverty, fighting preventable illness and treating curable diseases was undermined, and so many millions more lives were lost, for the lack of functioning taps and toilets. But unless we act urgently, this is exactly what will happen.”
We need a second development levy linked strategically to the achievement of the MDGs urgently. Let us hope our work here today facilitates that happening.’
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