I'll block Tobin tax on City, PM vows

To some, it is the solution to many of the world's financial woes, raising billions from the financiers seen as responsible for the crises in the first place.

But to David Cameron, a share transactions levy – the so-called Tobin tax – is a dagger aimed at the City of London that he will resist at seemingly all costs.

The Prime Minister said in an interview with the BBC yesterday that he would block a Europe-wide Tobin tax, setting the scene for another clash with French President Nicolas Sarkozy, pictured. Mr Sarkozy wants the Tobin tax to be on the agenda of a European summit in Brussels on30 January.

"If the French themselves want to go ahead with a transactions tax in their own country, then they should be free to do so," said Mr Cameron. "The idea of a new European tax when you're not going to have that tax put in place in other places, I don't think is sensible and so I will block it."

Supporters of the tax – a small levy of perhaps 0.5 per cent of the value of each trade – say it would raise funds that could be used to help the poor and repair government balance sheets. It might also deter speculative, short-term trading.

Critics say it will merely drive business away from London, unless it were agreed across the globe.

"Unless the rest of the world all agreed at the same time that we are all going to have some sort of tax then we are not going to go ahead with it," said Mr Cameron. He has previously claimed that the City is under "constant attack" from Brussels.

Sweden is also sceptical about how beneficial a Tobin tax would be. The Tobin tax is named after its creator, the Nobel laureate economist James Tobin, He first mooted the idea in 1972.