City warns Labour against unilateral financial transactions tax as McDonnell promises state-directed tech investment

Shadow Chancellor John McDonnell Delivers His Keynote Speech To Labour Party Conference
Labour shadow chancellor John McDonnell will call for a state-directed investment fund (Source: Getty)

The City of London will this morning issue a stark warning to Labour over the party's plans to introduce a unilateral tax on financial transactions, saying the move would hit consumers and cause job losses.

A so-called Robin Hood tax on financial transactions would damage the ability of British financial services to compete with other markets as the UK prepares to leave the EU, according to Catherine McGuinness, policy chairman at the City of London Corporation.

“At a time of great uncertainty for UK firms, they need policies which don't undermine their competitiveness on the global stage,” she said.

A financial transactions tax could also harm the London economy, she added.

Read more: Labour MPs prepare for Brexit showdown at party conference

“Anything which does that could result in the City losing its number one financial centre status, putting jobs at risk. In addition, any significant changes to financial regulation would inevitably see costs passed onto the consumer.”

Labour MP Wes Streeting, a member of the influential Treasury Select Committee, told City A.M. he was in favour of the levy in principle if implemented on an international scale. However, he added the party should proceed with "some caution".

"The City is right to warn that if the UK does that unilaterally it will cost jobs," he said.

The City warning comes as the Labour party meets in Brighton for its annual conference, where shadow chancellor John McDonnell will call for greater state-directed investment in research and development of technology, in what he will describe as a “fourth industrial revolution”.

Read more: A group of Labour MPs are pushing for Single Market access post-Brexit

If elected, Labour will establish a “Strategic Investment Board” to push funding towards the technology sector, he is expected to say in a speech today. The board would include the chancellor and the business secretary, as well as the governor of the Bank of England, in a significant departure from its current primary roles overseeing monetary policy and financial stability.

The shadow chancellor has previously told City A.M. the Bank of England would remain operationally independent under a Labour government.

Meanwhile yesterday, Labour MPs criticised the lack of Brexit-related debate at the conference. No motions on the UK’s withdrawal from the EU were planned at the time of writing for debate on the conference floor despite ongoing negotiations between the UK and the EU and pro-EU demonstrations outside the conference.

While shadow Brexit secretary Keir Starmer last night reiterated Labour’s demand for continued Single Market membership during a transitional period, Labour MPs publicly expressed their frustration with the absence from the agenda.

Former leadership contender Chuka Umunna said: “We should not be ducking this debate – we should be leading it”.

Umunna was one of 31 MPs who wrote to Labour leader Jeremy Corbyn at the weekend urging him to adopt staying in the EU's Single Market beyond Brexit as Labour party policy. In a speech yesterday to the conference, shadow Brexit secretary Sir Keir Starmer said he was "open to some sort of changed relationship" with the Single Market, but did not outline a model.

Read more: Labour MPs prepare for Brexit showdown at party conference

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