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Financial Transaction Tax: “Economic Suicide”

Regular readers of this blog will be aware that I am highly critical of the idea that Britain should introduce a Financial Transaction Tax (FTT). Indeed, earlier this year I lambasted both the Observer for an editorial that supported the tax and the Guardian for a Comment is Free piece also supportive of the tax. My expressed view:

if the FTT is implemented in the UK, London will be finished as the major financial centre for many financial transactions. Somewhere else, a place that does not implement the tax, will take our capital city’s crown.

On Thursday, the Guardian published a new article that appears far more balanced. Criticisms of the FTT were aired. Neil Bentley, the CBI’s deputy director general, is quoted and he reflects a similar point to the one I made:

This tax would divert transactions to other jurisdictions, like New York and Hong Kong, damaging the UK’s long-term competitiveness.

As well as the CBI, the Guardian article quotes from the recently published report from the Adam Smith Institute which said it would be “economic suicide” for the UK to implement the tax. The report makes the following important point:

The tax revenue generated from the UK financial services sector in 2009/10 was £53.4bn, representing 11% of total UK government tax receipts. Furthermore, in 2009 financial and business services generated trade surpluses of £40bn and £14.3bn respectively. Financial services accounted for 28% of the UK’s total exports of services, with banks standing as the largest single contributor.

It cannot be stressed enough as to how important the financial services sector is to the UK. The above statistics speak for themselves. If Britain loses it place as the key financial trading centre in Europe and one of the key financial trading centres in the world, it will be a disaster for the country; the impact will not just be felt by comparatively high earning bankers but by everyone as the loss of tax revenue will inevitably lead to further cuts in public services. It is all very well for ministers in other European countries to support such a tax, their own economies are not as dependent on financial transactions as our own.

I strongly urge all UK citizens to make sure they understand the implications of the introduction of an FTT. Support for it should be left to traitors and masochists.

Hat Tip: @citizen_sane

Disclaimer

This article is written by the author in a personal capacity and the views expressed, which are his personal views, do not necessarily equate to the views of any organisations with which he is associated.