FTT tax 'could damage UK savings'

The EU's proposed financial transaction tax (FTT) could have a severe impact on UK savings, creating a hole of some £3.6 billion even though the Treasury would gain no benefits from it, a new report has claimed.

Britain and especially London is the EU's most important financial centre, meaning it would be more affected than most by the emergence of FFT.

Research from London Economics, a policy and economics consultancy, has indicated that billions could be wiped off the value of equities and bonds in the UK if the controversial levy is implemented Europe-wide.

This is despite the fact that Britain itself would be out of the reach of the tax. France and Germany have already backed the proposal as they attempt to inject some urgency into the EU's ongoing consultation process.

"The biggest problem from a UK perspective is the political implication of the eurozone being able to set rules affecting the UK. Some euro area countries are much heavier on financial regulation," said Raoul Ruparel, head of economic research at think tank Open Europe.

Ben Jones, tax expert at Eversheds, recently told the Lawyer magazine that FTT in the EU could have a serious impact on British pensioners as well as other UK people with funds tied up in savings accounts.

Although in theory the levy is targeted at financial services institutions as a means of raising cash and making reparations following the recent banking crisis, Mr Jones warned that it could have an impact well beyond its original remit.

"As this most recent study demonstrates, the extra-territorial scope of the proposed FTT and the inter-connectivity of global financial markets means the FTT could still result in significant costs for the UK financial sector and UK savers and pensioners," he added.

The tax has been criticised from many quarters for its perceived impracticality, but could still go ahead depending on the attitude of the EU and its member states.