The Mayor of London Boris Johnson has hit out at the nine EU states who have called on the Danish Presidency to speed up the introduction of a damaging Financial Transaction Tax. The Mayor believes the tax would cause serious damage not only to London and the UK but to the future prosperity of the whole EU economy.
The nine member states, which include France and Germany, have sent a joint letter to the Danish Presidency requesting rapid progress with the project.
Apart from the huge damage the tax would cause to growth and jobs in London, Europe's most successful financial services centre, the rest of Europe would suffer as growth is hampered. Jobs would be lost not just in its finance sector and the related sectors that support it but in the entire Union and its businesses whilst other global financial centres, free of such a restrictive tax thrive.
The Mayor believes that the Commission should focus not just on helping to reform the financial services sector, but also on how to support and promote it, given that it will be play a key role in facilitating a broader economic recovery and future growth.
The Mayor of London, Boris Johnson said:
"Non, nein, no! I will not allow jobs, growth and the livelihoods of Londoners to be jeopardised by an unholy alliance of European states who view financial services as an easy target, despite the fact that it is crucial to the economic recovery of all its members"
"Do they not understand that our crucial wealth providers will be on the first flight out to join our competitors in the US and Far East if their ill thought out plans succeed? That would be a catastrophe for the Union and its citizens who are already reeling from the fallout from the failing Euro project."
Notes to editors
1. The nine Member States are France, Germany, Italy, Austria, Belgium, Spain, Finland, Greece and Portugal).
2. The financial services sector is a key London industry and a significant employer, accounting for around 330,000, or 8% of London’s workforce and around 20% of London’s Gross Value Added. Financial services are also London’s primary export to the rest of the world and London is, effectively, one of only two genuinely global financial services centres in the world along with New York. Both compete with Singapore, Hong Kong and other Asian centres in particular.
3. London recognises the urgent need to protect the EU economy, prevent and control systemic risk within EU financial systems, protect EU financial sustainability and protect consumers and taxpayers across member states. However, reform proposals must be designed and implemented in a way which supports economic growth in the EU and must not hinder the economic performance of the EU as whole or any member state or region, or indeed any individual business sector.
4. There is a substantial risk that an FTT would drive business to financial centres outside the EU and have a negative impact on GDP across the EU. Given the preponderance of financial services in London – and the centrality of financial services to London’s economy – the impact would be keenly felt in the UK’s capital city, with firms moving and jobs lost.
5. If the FTT is implemented it is not just London that will be adversely affected, but the entire EU. Across the EU the financial services sector employs 6.5 million people. Related to this are the accountancy and legal firms which employ 3.3 million people within the EU. These in total account for close to 10 million people, 4.5% of the EU workforce.
6. The Commission’s own Impact Assessment suggests that the FTT will lead to higher transaction costs, lower asset prices and an increase in the cost of capital. Even in the best case scenario the Impact Assessment shows that the FTT would reduce EU GDP by more than 0.5%, and this could rise to 1.76% if the mitigating factors were removed.