It was interesting to hear the Prime Minister come out so forcefully against a financial transactions tax (FTT) when talking to the media after Wednesday's European summit meeting. It was a bad tax which would destroy competitiveness, weaken pension schemes and destroy jobs he declared, and he would do everything he could to block it.
This is, of course, the same David Cameron who applauded loudly in the Commons a few weeks ago on Budget day when his Chancellor announced plans to clamp down on those who sought to avoid the UK's own financial transactions tax.
We call it stamp duty but it is still a tax on financial transactions, and one which is massively more onerous and arbitrary in its impact than anything proposed by our Continental cousins. Yet there was no mention of the loss of liquidity, jobs and competitiveness as the Chancellor told us how he was going to crackdown on unscrupulous foreigners who avoided British stamp duty when buying UK property.
Meanwhile, the stamp duty on share purchases is now so much part of the furniture that even the Stock Exchange no longer campaigns vigorously for its removal.
There may well be a reason to bat away the FTT, but it needs to be given more thought. It may damage the economy but others which have one include Hong Kong, Switzerland, South Korea and, amusingly, The United States, and it does not seem to have done them irreparable harm.
Also, at the level proposed – 0.1 per cent – it would be as nothing compared to the normal fees charged by banks and fund managers. And if, as some critics point out, it would make elements of City trading unprofitable, you have to ask whether this matters. If the profit on a deal is so small that a 0.1 per cent tax wipes it out, it does not seem a particularly valuable activity in the first place. If, in contrast, a deal does have economic value, a tax of 0.1 per cent, even if levied several times over in a chain of activity – is surely not going to stop it taking place.
Third, having an FTT might allow for relief elsewhere. If it did indeed raise the £8bn projected, that would allow for a corresponding tax cut – a reduction of VAT perhaps, or a cut in corporation tax to 18 per cent – which might give the economy a much-needed boost and help the rebalancing away from finance, which I think is still government policy.