Financial Transaction Tax and Economic and Monetary Union

Alison Seabeck Excerpts

Tuesday 18th June 2013 Commons Chamber

[Greg Clark]

My hon. Friend makes a powerful point. That is precisely why we are challenging the legitimacy of the proposal. The enhanced co-operation procedure is available to member states provided it is legal and compliant with the treaty, and our view is that it is certainly not. In particular, the extra-territorial effects—exactly what my hon. Friend is concerned about—are contrary to article 327 of the treaty on the functioning of the European Union, as it fails to respect the competences, rights and obligations of the non-participating member states. Furthermore, the decision to proceed with the FTT has extra-territorial effects for which there is simply no justification in customary international law. The Select Committee has been prominent in its scrutiny of that, and no doubt its Chair will have something to say about it.

We should consider the economic effects of the tax as well as the legal issues. What we are discussing is obviously very important to the economy of the United Kingdom, where 2 million people are employed in financial and related professional services. That sector has created a trade surplus for the country at a time when I think all nations should be trying to increase their trade, and its activities are highly integrated with those in other EU countries. Our best estimate is that 30% of over-the-counter derivatives trading in London involves a counterparty in a proposed FTT zone country; similarly, about 30% of investors in UK gilts are located overseas, which means that the FTT is even likely to affect UK Government funding costs.

However, it is not only the financial sector that would be affected. The European Association of Corporate Treasurers, which represents those who manage companies' finances throughout Europe, has said, very explicitly, that the FTT

“will fall on companies in the real economy, and compound the negative effects of the financial crisis.”

In this country, the CBI agrees.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

What would be the implications of the UK’s rejection of the FTT? Would the Government raise the bank levy rate for what I believe would be the sixth or seventh time?