Lords committee hits out at financial transactions tax

A House of Lords committee has slammed proposals from the European Commission (EC) to introduce a financial transactions tax (FTT).

More than 70 per cent of the money raised by FTT, which is also known as a ‘Tobin tax’, would come from the UK, the Lords EU Committee found.

Prime minister David Cameron has repeatedly spoken out against proposals for a European-wide FTT and said the UK could only support such an idea if it was imposed around the world.

However, some EU leaders have shown an interest. French president Nicolas Sarkozy has vowed to put the tax in place if he wins Sunday’s presidential election, while his opponent, Francois Hollande, has made a similar promise.

FTT has also received support from some British groups, which believe it could help to rebalance the economy.

Jon Slater, a spokesman for the Robin Hood Tax group, said: “The financial sector doesn’t pay its fair share and there is a good opportunity while ordinary people are seeing their services cut, jobs cut and salaries stagnate, while the City continues to pay itself billions in bonuses, to do something.

“The reason we are in this crisis is in a large part down to the mistakes of these people.”

Slater disputes the notion that imposing FTT would see an exodus of financial trade to centres outside of the EU, such as Singapore and New York.

“We already have a tax on share transactions which is 0.5 per cent – that’s higher than the proposed rate.

“The UK already raises £3bn a year from stamp duty on shares and that hasn’t prevented the London Stock Exchange from being one of the world’s leading centres.

“Secondly, every time we talk about an additional tax on the financial sector, like the bonus tax, we are told workers will flee abroad. But it didn’t happen, it’s a bluff by the financial sector and its lobbyists.”

However, the report from the House of Lords committee said the EC had “failed to make a case for the tax” as a way of funding its next seven-year budget, which will run from 2014-2020.

The UK could account for 71 per cent of the revenue it raises if it were introduced as its financial sector is far stronger than those in other EU nations, peers believe.

But Slater added: “The thing to remember is always that negative assessments only tend to look at what would be taken away from the economy; they rarely look at the benefits.”