The Tobin Tax

One of the strangest things about the proposed European Transaction Tax is the wishy-washy reaction of the British Government.

The transaction tax is supported by members of the general public and many politicians who have never held down a proper job, largely on the basis that it is a tiny percentage - 0.1%. What harm could that do? Mr Barroso, one of the three presidents of Europe, is of course in favour. He says it could raise €55 billion a year. Got to be magic, hasn't it? 0.1% and €55 billion.

The position of the UK Treasury apparently is that it would be all right if everybody imposed the tax. There is some reasonableness to this: but New York, Zurich and Singapore are not going to impose it. They're not that stupid, seeing a wonderful opportunity here to break the dominance of London.

At whatever level a transaction tax is going to raise the costs of borrowing and reduce the liquidity in the market, things we really don't need right now. And the Treasury should be aware, and be making the point, that 80% of this would fall on London. It is quite easy if you are France or Italy, with no capital markets to speak of, to support the introduction of a tax on Les Anglo-Sassons.

Mr Osborne, the Chancellor, belatedly in my view, has said he will veto the tax. He shouldn't have let the debate get so far: the answer right from the start should have been not 'maybe', not 'we can talk about this' but simply 'NO'.