EU: Financial Transaction Tax (EUC Report)

Viscount Brookeborough Excerpts

Tuesday 17th December 2013 Grand Committee

[Viscount Brookeborough (CB)]

My Lords, we are, as you see, very critical of the proposed FTT, for the reasons laid out in both reports, that of March 2012 and now this one.

I, too, have never seen such criticism of a Government’s response to an inquiry as can be found in paragraphs 12 to 20. I asked the Minister to explain why such a detailed and well researched report from a parliamentary committee was treated in such a dismissive way for so long. The lack of recognition and acceptance of the issues raised at the time have left us where we are now, and it is an example of the UK’s lack of engagement on what may become EU policy.

This brings me to the perceived attitude of our Government to the EU. All too often, we are prepared to say that our main interest is the single market and we are far too negative about most other things when we should not be. For example, regardless of whether we stay in the EU, amend the treaties, or get out, the success of the eurozone is important, not only to us but to the rest of the world. Suffice to say, a little more diplomacy, and less barracking from the sidelines, would not go amiss. Government ambitions for their future in the EU may be difficult, or even impossible, to achieve currently. However, that makes its lack of engagement in such issues as the FTT even more inappropriate. The adoption or otherwise of this tax will not sink the EU, but we could have had much more influence on what is now happening.

I wish to comment on this tax from the perspective of the majority of our citizens, who, like me, are lay people as far as finance is concerned. This is a direct tax and a bad precedent, not only on businesses but on individuals, which will affect most financial transactions, not only for the millions who own or trade shares but for those who have pensions. Almost everyone will be affected directly or indirectly. This is the thin end of the wedge, the slippery slope: a direct tax on individuals. Even worse, it is 11 countries attempting to tax individuals—nationals of countries outside their group and their own jurisdiction—entirely against their will and with no democratic mandate.

When a nation taxes its population, the Government must have a mandate and justify the purpose of doing so in a budget. There is no mandate or legal basis for this daylight robbery. Even worse than that, it is most inappropriate at present. I ask the Minister what the Government will do to ensure that this country and our citizens will not be adversely affected. I will just have time to address this if I borrow a little of the time of the noble Lord, Lord Flight. Box 1 of our report gives the objectives—I will not read them all—as laid out. On objective (a), as far as I am aware, there is currently no fragmentation to worry about. Objective (b) talks about the costs of the recent crisis. None of what we are talking about, or the bank resolution fund—which we are not talking about today, but which is important—refers to the current crisis and the cost. It is all about the future. Objective (c) adds:

“To create appropriate disincentives for transactions which do not enhance the efficiency of the financial markets and thus trigger overinvestment in activities which are not welfare enhancing”.

That is the woolliest rubbish of which one could possibly conceive. How on earth is an inert tax going to differentiate between actions which may not be welfare enhancing? That is absolutely ridiculous. Luckily, one other objective was dropped: namely, a new revenue stream that could gradually displace national contributions. Does anybody in this Room or anywhere else think that our contributions will ever be reduced by anything?

--- Later in debate ---

[Lord Newby]

My Lords, I completely agree with it.

[Viscount Brookeborough]

Perhaps I may ask a simple question. I think the Minister said that the majority of politicians in Europe wanted this tax and therefore it would be difficult. Can he explain how 11 out of the total of the member states comes out as a majority?

[Lord Newby]

I apologise if I said that. What I meant to say was that there was not a qualified majority against the proposal. There was not a sufficient weight to prevent the proposal going through. I think that that was borne out by what happened at the relevant Council meeting.