Peers warn transaction tax would hit Britain hard

A HOUSE OF LORDS committee has warned that more than 70% of revenues generated by the European Commission’s proposed tax on financial transactions could come from the UK.

The Lords EU Committee called for the EC to exercise financial restraint on the financial transaction tax and reflect the austerity currently being experienced in other EU member states.

The EU’s budget should not rise higher than inflation in the remaining years of this decade, the cross-party committee said in a report.

Areas such as the Common Agricultural Policy should be cut in order to allow funds to be allocated to measures to stimulate economic growth – such as the Creative Europe budget, which supports cultural projects – said peers.

The report said the European Commission had “failed to make a case for the tax” as a method of funding its next seven-year budget, which will run from 2014-2020. Should it come in, the UK could contribute approximately 71% of revenue raised because its financial sector is far larger than those in other EU nations, said peers.

The UK government also described the previous seven-year budget proposed by the Commission last June as “completely unrealistic”. That budget is still under negotiation in Brussels.

The Commission says its proposals will give the EU an average annual budget of £125bn a year over the seven years from 2014, amounting to 1% of the combined GDP of the 27 member states. However, the Treasury says it represents an 11% increase and would add £10bn to the UK’s contributions to Brussels during that time.