Financial Transaction Tax: European Union Report

Lord Dear Excerpts

Wednesday 11th July 2012 Grand Committee

[Lord Dear]

My Lords, I am grateful to noble Lords for allowing me to speak in the gap. I had intended to speak at greater length, but I knew that I would be detained in a committee elsewhere in your Lordships’ House, which was indeed the case. I shall keep my remarks very brief, as is the convention. I should also say that I am a Member of the European Union Committee which produced this report, and my thanks go to the noble Lord, Lord Harrison, for heading that inquiry and writing the report.

I will confine my remarks very much to headlines, bearing in mind the time constraint by speaking in the gap. First, I agree that the financial transaction tax design, as proposed by the Commission, is seriously flawed. It smacks of being hasty and not well thought through, and it is contradictory in places. It leaves us with doubts about its viability.

Despite the very strong case put forward by the noble Lord, Lord Giddens, I believe that there is a likelihood that financial institutions could migrate and relocate away from the EU to avoid paying the tax. Personally, I am especially concerned that the proposal might lead to a reduction in the GDP within the EU. In fact, the Commission forecast a negative impact of 1.76% of the total GDP in the EU, which it says equates to a loss of €200 billion or half a million jobs. That is not something that one should put aside lightly.

Moving from the general to the particular—and this is a point already made by noble Lords—the implications for the City of London are considerable. As we know, it is the largest financial sector in the whole of the EU and it is a core element in our own economy. In the Minister’s response, I believe that the Government should declare their position on this tax with greater clarity. There is already some ambiguity in this country and elsewhere in Europe; people have talked about “supporting the tax in principle”, and different variants of the FTT have been discussed which leads to confusion and doubt. I turn to the Minister to reassure the Committee that the Government will continue to play a constructive role in this debate. The implications for the EU in general and the UK in particular are too great to allow less than full attention to be paid to this issue. Here I echo the concluding remarks of the noble Lord, Lord Kerr of Kinlochard, in asking the Minister to reassure the Committee that that is the approach that the Government will pursue and that they will pursue it with greater clarity and vigour.