Monday 17 February 2014 8:51 pm

EU finance tax to wipe £3.6bn off UK savings

THE EU’S financial transaction tax (FTT) would tear a €4.4bn (£3.6bn) hole in UK savings even though the Treasury would gain no revenue from it, according to new forecasts.

The huge sum would be wiped off the value of equities and bonds in the UK if European countries pursue the levy, despite Britain being outside of the reaches of the tax. That would make up 0.6 per cent of the total holdings, equivalent to 0.2 per cent of GDP, an influential group of industry bodies claimed today.

In countries where the tax would be in place, the effect would be even more crippling. Italy could lose as much as €204bn in holdings, equivalent to 12.9 per cent of GDP.

“We will not take part and will ensure that we are not caught in the effects of this tax being introduced by other countries. Let’s be clear – the financial transaction tax is not a tax on banks or bankers, it’s a tax on pensioners and people with savings,” said a Treasury spokesperson.

More than half of UK household savings are held as financial assets, in comparison to only 17 per cent in the euro area as a whole, leaving the UK exposed to the effect of the tax.

“Most debate so far has focused on transaction costs, but this report looks at the impact of asset value,” said James Walsh of the National Association of Pension Funds (NAPF).

“It’s a whole extra impact on savers, in addition to the impact on their pensions, and it further underlines the threat of this policy.”

The German and French governments are set to meet tomorrow in an attempt to keep up pressure to implement the tax, which has come up against repeated opposition on practical and legal grounds.

Ahead of a meeting of the Eurogroup yesterday, German finance minister Wolfgang Schaeuble said of the tax: “I hope that we take a step forward on that.”

Eurozone countries that implement the tax are expected to see the largest impact on long-term household spending. Germany, Italy and Spain are forecast to see consumption cut by 1.4, 1.2 and 1.6 per cent respectively, according to the report.

The research was carried out by London Economics on behalf of the City of London Corporation, TheCityUK and the International Regulatory Strategy Group.

“The biggest problem from a UK perspective is the political implication of the Eurozone being able to set rules affecting the UK. Some euro area countries are much heavier on financial regulation,” said Raoul Ruparel, head of economic research at think tank Open Europe. He added: “This is the latest in a long line of  knocks to the idea of a transaction  tax.”