The UK is on a collision course with European leaders over controversial proposals for a tax on City trading.
European Commission president Jose Manuel Barroso proposed the tax yesterday in a speech to the European parliament in Strasbourg.
He said a financial transaction tax for all 27 EU countries could raise £47 billion a year and would ensure the sector made ‘a fair contribution’ in an austere economic climate.

However, the Treasury said it would only back a financial transaction tax if it were applied globally, while UK business leaders said introducing such a levy now would be ‘misguided’. Chancelleor George Osbourne warns it would drive vital business away

Germany and France have pressed the EC to propose the tax on all financial investment systems in a bid to show taxpayers they are committed to recouping some of the costs of the banking crisis.

EU taxation proposals require unanimous support from the region’s 27 national governments to become law.

A spokesman for the UK Treasury said it will engage with its international partners on FTT proposals and has no objection to them in principle.
He went on: ‘But any financial transaction tax would have to apply globally and there are a number of practical issues that need to be worked through.’
The Treasury has already moved to repair some of the damage caused during the financial crisis after it unveiled plans for a new bank levy which should raise £2.6 billion a year by the end of 2012.

Chancellor George Osborne earlier this month warned that a specific EU-wide financial transaction tax could drive investment out of Europe and threaten the interests of the City of London. Speaking on the sidelines of a recent G7 summit, the Chancellor said: ‘I am against an EU tax.
There would be no point introducing a financial transaction tax that led, the next day, to our foreign exchange markets moving to New York or Singapore or anywhere else.’
A tax on financial transactions was introduced in Sweden in the 1990s after a financial crisis but was dropped when trading volumes moved abroad.

Two things spring to mind here:
1. The story of the killing of the Goose that laid the golden egg.
2. Why is the UK expected to contribute so much (as most EU bank trading happens in London) to support a currency which is not ours and we choose not to join?