Cameron: Financial transactions tax 'not a good idea'

Prime minister David Cameron has reiterated British opposition to a European financial transactions tax (FTT), saying it is "not a good idea".

He fears it could damage the UK's financial services sector and Europe's global competitiveness.

The FTT aims to discourage speculative trading by taxing transactions of shares, currencies and bonds.

Speaking at a conference in London, he said a FTT would encourage financial firms to relocate outside the EU.

In April, the UK government launched a legal challenge against the plans in the European Court of Justice.

The tax would not work unless it was "applied globally", he said.

Of 27 EU member states only 11 have signed up to the proposals: Germany, France, Italy, Spain, Belgium, Austria, Portugal, Greece, Slovenia, Slovakia and Estonia.

Business lobby groups are concerned that UK firms trading with the UK branches of French or German banks could be hit by the tax.

If the cost of financial transactions rises as a result of the FTT, the City of London, which currently accounts for 40% of the EU's financial services activity, could lose billions of pounds worth of business, they fear.

Mr Cameron also said it was time to stop "bashing banks" because the financial services sector and the City were "core strengths" of the British economy.

He also reasserted his belief that the EU could and should be reformed to allow countries like UK to claw back more of their sovereignty.

'Disingenuous'

"Stratospheric levels of unemployment" in countries like Spain and Portugal showed that EU-imposed fiscal policies were not working, he argued.

However, supporters of the tax accused Mr Cameron of promoting the interests of the City, not the country as a whole.

David Hillman, spokesperson for the Robin Hood Tax campaign, said: "It's disingenuous of Cameron to claim FTTs will cause bankers to flee when this is clearly not the case with the UK's own stamp duty on shares.

"It raises the Exchequer around £3bn a year and it makes no difference whether those trades take place in London, Hong Kong or Tokyo.

"Instead of repeating the lines of bank lobbyists the government should give a proper justification for why they are refusing to tax the banks more and are cutting people's services instead," Mr Hillman said.