Senior Tories on the attack over European transaction tax

Senior figures in the Conservative Party attacked moves for a European financial transaction tax over the weekend after Prime Minister David Cameron failed to convince German Chancellor Angela Merkel to drop the proposal.

Sir John Major said the so called Robin Hood tax would hit the City like a  “missile”, while London Mayor Boris Johnson said it would be seen as a “hostile act” in the square mile.

At a meeting in Berlin on Friday, Cameron and Merkel agreed that the FTT would be best implemented on a global level but failed to agree over introducing the tax only within the European Union. Germany and France are backing the move to help deal with the sovereign debt crisis currently raging in the 17 member Euro area..

Proposed by the European Commission in September, the tax would impose a levy of 0.1 per cent on stock and bond trades and 0.01 per cent on derivatives. The Investment Management Association has warned it will hit investors and pension savers.

In an interview with the Guardian Major said: “The proposal at the moment for a financial transaction tax is a heat-seeking missile proposed in continental Europe aimed at the City of London. If there is such a tax about 80 to 85 per cent of the yield would come from the City. We cannot accept a financial transaction tax and I do not think we will have to.”

Changes to rules for euroarea countries currently under discussion will require a change to the Lisbon Treaty. Britain could block them by witholding support if concerns over the tax are not met.

After Friday’s meeting, aides of Merkel and Cameron stressed discussions had been constructive. However, Merkel admitted: “We are at one saying that a global FTT would be implemented by both countries immediately. But on just a European one, we did not make any progress. We have to both work where we feel change is needed.”

Cameron said: “The danger, we have always believed, is driving transactions to a jurisdiction where it would not be applied. So a global tax would be a good thing but in Britain also we have put in place a stamp duty on share transactions, a bank levy. We believe we are asking financial services to make a fair and proper contribution to rebuilding our economy, to bring down our debts and our deficits.”

With the recent economic woes in Europe and over 80 Conservative MPs defying the Government to call for a referendum on membership of the European Union earlier this month, Britain joining the Euro is off the political agenda. But, speaking on the BBC’s Politics Show yesterday, ex-Deputy Prime Minister Lord Heleltine said he expects the Euro will survive its current problems and that Britain will join it at some point in the future.