News Column

Britons face pounds 3.6bn cut to savings from Robin Hood tax, report claims

February 18, 2014

Phillip Inman Economics correspondent

British savers could suffer a pounds 3.6bn cut in the value of their savings following the introduction of a financial transaction tax, a study into plans by Brussels to raise a levy on City trading has claimed.

German and Italian households would incur the biggest hit to savings following the introduction of the FTT, said the report by consultancy London Economics.

Savers in Spain and Slovakia would also lose billions should their governments introduce the tax as the impact of the levy drives down the value of their holdings.

Under the most draconian version of the FTT that the 11 countries involved could agree, UK savers would suffer a euros 4.4bn (pounds 3.6bn) hit, 0.6% of debt and equity holdings, while the German savings market would slump by 14.1%. A light-touch tax would reduce German savings by 3.6% and UK savings by 0.1%, the study claimed.

The report, which was immediately derided by anti-poverty campaigners, comes before meetings in Brussels to decide the scope of the FTT and how the 11 countries should implement it.

The countries are poised to agree terms for implementing the tax, which will add a charge to trades in equity and debt markets, currency transactions and the exotic derivatives blamed by many economists for the 2008 banking crash.

EU finance ministers gave their approval last year to the FTT in the teeth of dire warnings from the financial services industry of an exodus of funds and despite abstentions by the UK, Luxembourg and the Czech Republic.

The levy, which could raise as much as euros 35bn a year for the 11 countries, is designed to prevent a repeat of the conditions that stoked the credit crunch by reining in investment banks.

According to London Economics, which wrote the report for the City of London Corporation, some savers in the UK and Luxembourg will be hit, but the cost will be small compared with the impact in Germany. The report said savings could lose euros 150bn in Germany and euros 200bn in Italy. It argued that the tax would prove a major discouragement to financial activity in Europe and lead to a long-run reduction in savings.

The Robin Hood tax campaign, which brings together anti-poverty charities to promote the FTT, said the report was based on the false premise that most trading by EU banks was in the interests of savers. It said studies of the financial services industry showed most transactions were designed to generate commission and charges for the banks without bringing any benefit to savers.

To illustrate the benefits of the levy for savers, the campaign has produced a video starring Bill Nighy. Spokesman David Hillman said: "This scaremongering from the Square Mile's PR machine should be taken with an enormous pinch of salt. The truth is this tax will hit some of the worst offenders in the City - the high-frequency speculative trades that helped cause the crisis.

"As many experts have shown, given the tax's design, the effects on people's pensions and savings will be negligible."

Actor Bill Nighy has appeared in a video by the Robin Hood tax campaign to promote the levy on financial transactions

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Source: Guardian (UK)

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