Stuart Fraser on the Financial Transaction Tax

15:31 Wednesday 28th September 2011
BBC News 24

ADAM SHAW: Europe has laid out plans for a financial transaction tax, despite opposition from the United States and the UK. The European Commission has agreed to the idea in principle. The Head of the EU Commission, José Manuel Barroso, has outlined the plans, saying European states have provided guarantees of just over four and half trillion euros to the financial sector, and that it was time for that sector to make a contribution back to society. Well we can talk about this now with Stuart Fraser, who is the Policy Chairman of the City of London. Mr. Fraser, thank you for joining us. Well those are the words of José Manuel Barroso. Basically it’s about time the financial sector paid back some of that money and that goodwill. Do you agree?
STUART FRASER: Well if it is, this is absolutely the wrong way about going about it. You’ll decimate the profits of many of the financial firms, because if you introduce a transaction tax, as the Commission themselves say, they would lose a lot of business out of the EU. And even the Commission says, in its Impact Assessment, it’s likely to raise maybe ten billion euros, which is very .. not very much money, and in fact could be actually less than the cost of implementing the plan. You also have to bear in mind, 80% of that money raised we estimate will come from London. So is this a European tax, or a tax on London? But I will have to say this. They know very well that the British Government will veto this. That’s been made quite clear. So what is the game? What is the end game? Because they say, if we do veto it, then it will be applied in the Eurozone only. And I think this is the most worrying trend. There is a clear separation beginning to emerge between the European countries within the Euro, and those without.
ADAM SHAW: Just imagine that this became a globally agreed tax. Would you agree with it then?
STUART FRASER: As Government says, we would agree to look at it. That’s right. They said that they are quite prepared to look at it, if globally agreed. But you do bear in mind we have our own taxes. We have the levy on the banks here. And indeed we do have stamp duty, which is a transaction tax, if you like. So that would have to be harmonised with existing taxes. And, by the way, where does the money go? Does it go to the European Commission, to be dispersed there? Or does it stay with the national countries, and where the money is raised? Very important for the UK and London.
ADAM SHAW: Would you accept though that there is a responsibility on financial institutions to put some money back into the system, because of these huge guarantees that the European Commission is talking about, that it’s had to establish?
STUART FRASER: Well interestingly enough, these are guarantees. The British taxpayer through Bank of England will actually make a profit, because they guaranteed, but were never called upon that guarantee. And it’s like an insurance policy. The insurance policy covers you. You pay the premium, but they’ve never had to pay out. At the moment they haven’t had to pay out. But clearly if the sovereign debt crisis gets worse, then they will have to. Is that the fault of the banks, or the fault of the politicians? So I come back again that in the UK, which is the one that will be most affected, we are already extracting several billion pounds a year from the banks, through our levy.
ADAM SHAW: OK. Stuart Fraser, joining us live from City of London. Thank you very much indeed for your time Mr Fraser.