Former chancellor Nigel Lawson has attacked the European Union’s proposed financial transaction tax, saying the ‘perverse and unacceptable’ levy would drive business from London to New York.
In a foreword to a new paper by free-market think tank the Centre for Policy Studies, Lord Lawson says the EU is currently engaged in “a frenzy of misconceived regulatory activism” when it comes the financial services industry.
Lord Lawson argues that the EU’s financial regulation stems from a desire to “punish” banks and other organisations seen as responsible for the financial crisis, as well as claiming “some quarters” want to reduce the importance of the City of London.
He cites the incoming Solvency II insurance regulation as one example of the EU’s “misconceived” financial regulation, noting that Prudential Regulation Authority chief executive Andrew Bailey has described it as “shocking”, “lost in detail and vastly expensive”, and “frankly indefensible”.
Lord Lawson says: “The coming EU financial transactions tax is, if anything, even worse. Designed both to punish the bankers and to raise money for the EU budget, its principal effect will be to drive financial business away from the EU (including the UK) to more hospitable jurisdictions elsewhere.”
The suggested FTT would impose a levy of 0.1 per cent on transactions of shares, currencies and bonds, while one of 0.01 per cent would be put on derivative trades. The EU says the tax could raise as much as €35bn a year, but it has been met with opposition from the financial sector.
“There are only two world-class financial centres: London and New York. That it should be considered in the interests of Europe to drive business away from London, to the benefit of New York is both perverse and unacceptable,” Lord Lawson concludes.