Treasury financial secretary Mark Hoban has told peers the recent French commitment to introducing a domestic financial transaction tax does not make it inevitable the tax will be applied across the eurozone.
On Monday, French president Nicolas Sarkozy said France would push ahead with its own 0.1 per cent transaction tax. Yesterday, giving evidence to the House of Lords EU sub-committee on economic and financial affairs, which is running an inquiry into the tax, Hoban said the move could be a response to hostility toward the idea of the tax being applied across the eurozone within countries like Ireland and Luxemburg.
He said: “I would not assume a eurozone wide FTT is inevitable. Some financial centres in the eurozone would be adversely affected and there are plenty of people in Europe who can see the pros and cons and perhaps share the same view as us. So I suspect recognising the degree of opposition to an FTT may be one of the reasons Sarkozy has gone for unilateral action.”
This week the European parliament is expected to vote on measures to boost growth and jobs. Hoban said that imposing the tax within the eurozone would undermine this aim. “It would be an unwise thing to do,” he said.
Conservative peer and former Shadow treasury minister Lord Howard Flight said he was “disappointed” to hear the UK Government does not oppose the tax in principle but only the fact it is not being applied globally.
Lord Flight said: “Going back 20 years the Conservative Party has been, off and on, committed to abolishing stamp duty which is a crude from of FTT on the basis it double taxes savings. So, I would like to suggest there is a reason for opposing it in principle.”
Hoban told the committee he thinks with the introduction of the bank levy, which the Treasury says now raises £2.5bn a year, the Government has the level of taxes paid by banks “about right”. He added he has seen no evidence for the claim put forward by proponents of the FTT that it would reduce risky or speculative behaviour. “I have heard the arguments but I am not sure I have seen the evidence and we need to have a debate based on evidence.”
Hoban accused some countries struggling with sovereign debt crises of using financial institutions as a “scapegoat” for their current problems.
He said: “It is vital banks, insurance firms and asset management firms all try to demonstrate the value they add to the wider economy and why their services are vital.”