The chancellor told a stormy meeting of finance ministers in Brussels that a transaction tax applied only in Europe would cost the region 995,000 jobs.
But his decision to also attack a Tobin tax on the grounds that it would disproportionately hurt those with retirement schemes muddied the government’s negotiating position, because even a global version of the levy would hit pensioners.
“I would suggest that we put to rest the idea that there is going to be some European financial transaction tax,” he said.
David Cameron has previously said the coalition supports a global tax “in principle” but yesterday Osborne said the prospect of it winning global backing was “fanciful”, adding: “We have to ask ourselves whether this [debate] is the best use of our time.”
German finance minister Wolfgang Schaeuble admitted there had been a “lively” discussion but vowed to press on with the proposal.
Last night the European Commission claimed a 0.1 per cent tax on most financial transactions, with a 0.01 per cent rate on derivatives, would generate €57bn a year.
France, Germany, Spain and Belgium have spoken out in support of the plan while Britain, Denmark, Sweden, the Czech Republic, Bulgaria and Romania oppose it. Finland, Holland, Italy and Ireland are among those with doubts.
Osborne’s concerns echo Dutch pension group APG Algemene Pensioen Groep, which last week wrote to commissioners to say the levy would be a “tax on current and future retirees”.
Osborne fears that a European tax would lead to financial services companies leaving London and Europe for the US and Asia. He has called for an EU vote on the tax in an attempt to flush out other sceptics.
Last week Osborne was accused of hypocrisy after City A.M. revealed he had expressed doubts about the tax in a private letter to bank chiefs despite publicly saying he would support one if it was adopted globally.