Shadow Chancellor John McDonnell’s plans to extend the scope of Labour’s proposed financial transactions tax have come under criticism from the head of a City lobby group.
“A tax on financial transactions would be bad for business, bad for investors, bad for savers, and bad for the economy,” said Miles Celic, chief executive of Thecityuk.
“It would ultimately raise everyday costs for hard working families and small businesses across the country. Savers would be hit and the value of their pensions and investments eroded,” Celic added.
It was reported yesterday that McDonnell is set to extend Labour’s proposed transaction tax, potentially bringing in an extra £2.1bn for the government.
Under existing plans, the 0.5 per cent duty on share trading would be extended to other asset classes, which Labour says would raise £4.7bn per year.
But the Financial Times reported yesterday that McDonnell is backing an extension of the proposals to cover foreign exchange and commodities transactions, as well as related derivatives trades.
The proposals would seek to avoid capital flight by charging UK tax residents who trade the assets, but Celic said the UK’s financial industry would suffer were the tax to be introduced.
“Our industry is already the UK’s biggest taxpayer, paying £14 out of every £100 of UK tax revenue raised,” he said.
“Financial centres across the world consistently go to great lengths to attract financial and professional services business, and the jobs it supports, away from the UK. They recognise what a huge national asset it is. The UK is a world-leader in financial and related professional services, but our lead will not last long if we start booting balls into our own net,” Celic added.
McDonnell is set to attend an event discussing the proposed taxes in London tonight.
Main image credit: Getty