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MPs call for FTT tax

25/07/13

British MPs have caused dismay and consternation in the City by suggesting a financial transaction tax (FTT) as part of its response to the Kay Report on corporate governance, raising that the EU's plans for a similar scheme could in fact pick up plenty of support in the UK.

Business chiefs and financial directors have been critical of the so-called 'Robin Hood' tax, which they claim would make it harder for Britain to maintain its status as a global financial hub and constrain economic growth.

Professor Kay's report into short-termism in equity markets was published last year, although it did not contain any mention of the FTT, reports the Telegraph.

However, Adrian Bailey, chairman of the Business Select Committee, said he had found plenty of support for the concept during the sessions discussing Professor Kay's findings.

"The government should assess the likely impact of the introduction of an FTT and how the obstacles to its implementation can be overcome," he declared.

His enthusiasm could be dampened by resistance to the tax from key figures like chancellor George Osborne, who has stated his opposition to the idea after concerns were raised that it drove businesses out of France when trialled there.

Simon Walker, director general of the Institute of Directors, praised the report but warned that "a tax on financial transactions will catch not only bankers but also businesses, pension funds and bank customers up and down the country".

MPs have also called for faster action on the Kay Review, which has been available since 2012 but not yet acted upon in a regulatory sense.

It found that both shareholders and the general public have lacked confidence in corporate governance, especially in the financial services and banking sector, following the various crises of the last few years.

Among other suggestions, Professor Kay argued that shareholders should be given more of an opportunity to link pay to performance, ending the toxic culture of unwarranted bonuses in the City.

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