Labour MEPs back plan to clobber the City with Financial Transaction Tax levied by the EU

By Jonathan Isaby

I am only just catching up with a story from Tuesday in the European Parliament, but one which eventually could have a massive impact on Britain and in particular the City of London.

MEPs voted in their droves (529 to 127, with 18 active abstentions) for the Podimata report on "Innovative financing at a global and European level" which, amongst other things, proposes an EU Financial Transaction Tax (EU FTT) - something on which the European Commission can now be expected to draw up a draft proposal. The report also calls for feasibility studies into an EU carbon tax on every product sold.

Supporters of an EU-wide FTT suggest that at a rate of 0.05% it could raise the EU €209billion, of which a disproportionately large amount would come from the City of London, with some suggesting it would treble the UK's EU contribution to £20 billion, whilst redirecting some tax receipts away from the Treasury and most likely pushing some transactions offshore to less-regulated markets.

Of the British MEPs participating in the vote on Tuesday, all 13 British Labour MEPs backed the move, as did four Lib Dems (Chris Davies, Fiona Hall, Edward McMillan-Scott and Graham Watson) two Greens and the Plaid Cymru MEP. There were active abstentions from 3 Lib Dems, the SNP MEP and the Sinn Fein MEP.

The report was opposed by all British Conservative MEPs participating in the vote, with just one of our delegation absent from the division. Four Lib Dems and most UKIP MEPs also joined the British Tories in opposing the report. 

Here's what Vicky Ford MEP, the Conservative economics spokesman in the European Parliament, had to say in reaction to the vote:

"Whilst it is absolutely right that financial services companies should pay increased taxes, this is not the way to do it. A European Financial Transaction Tax would be a tax on the City of London raised by Brussels to fund pet projects. No wonder Labour MEPs are so enthusiastic for it.

 Socialist MEPs show once again that they completely fail to understand the global nature of finance. Their slogan calls for the EU to regulate global finance as though the world stops at the borders of the EU.

"Labour MEPs want to treble the UK's payments to the EU. That is simply indefensible at a time when they should be seeking to cut what we pay to Brussels. Any Financial Transaction Tax levied must be in concert with at least the G20 countries, with revenues going to national exchequers, not to the EU.

 Imposing a tax of this nature without a global agreement would cause some of our financial services sector to relocate, losing the UK billions in tax revenues and costing untold jobs.

"The UK already has a bank levy in place which will raise ₤2.5 billion a year by 2012-13, thus ensuring bankers are making a contribution, and it is better designed to incentivise more stable financial practices."