Monday, 26 March 2012

Mr Barroso, you can stick your £6.4 billion where the sun don't shine (probably in a Swiss bank vault)

Today's press has largely revolved around the #CamDineWithMe thread.

Just who has the Prime Minister had to dinner?

One wonders whether Mr Cameron has had Jose Manuel Barroso over for fish and chips and a pot of tea, judging by the astonishing offer the President of the European Commission put on the table last week.

In a bid to push through the controversial Financial Transactions Tax, or Tobin Tax, which would see a levy placed on all international transactions that would go straight to EU coffers, Mr Barroso waved a tantalizing metaphorical wad of cash under our Prime Minister's nose.

He proposed cutting the UK's contributions to the EU by €7.7 billion, or £6.4 billion.

So far the UK has stood steadfast against the proposals which would see the City of London shoulder the bulk of the charges (around 80%) when similar levies are not applied in other countries. Fears that this would drive the Financial Services industry out of the UK have far from been assuaged by the Commission President's offer.

The tax would in effect allow national contributions by the EU to be cut in half, essentially moving towards the EU becoming a self-funded, and thus federal, set up. One imagines that the long term goal would be to steer all taxation towards Brussels, essentially subsuming the last bastion of sovereignty into the realm of the EU.

However the FTT would, in effect, be the City of London funding their federal dreams.

It is estimated membership fees could be cut by €54 billion, while countries could keep a third of the proceeds they levy themselves.

The idea, originally the brain child of French President and 'Anglo-Saxon'- hating Nicholas Sarkozy, couldn't work unless the choice was made unanimously and universally ensuring that such a system would operate around the world and that banks in London wouldn't simply up sticks and leave. It's hardly surprising that Sarkozy would want to make the City of London the EU's cash cow and has even gone as far as leading a pact of nine EU countries that want to see the proposed levy pushed through. Without the City, Britain's might would be significantly lessened, silencing the often most stubborn and uncooperative member state of Europe and making her more subservient to the EU dream, enabling France and Germany to step up and take greater control. For decades our Financial Services have been the envy of our European neighbours, putting us on an equal footing with other great cities like New York. Imagine being able to not only take that away, but use it to fund what was primarily a French conception of European supranationalism, and you can see why Sarkozy is going around with his clip board trying to extract the signatures of the other European leaders.

It's estimated the Financial Transactions tax would be worth some €54 billion, which suddenly makes the €7.7 billion sweetener look a little sour.

It's not hard to see why the City of London is so valuable to the UK.

Financial Services in the City of London employ 349,200 in London alone, and a staggering 1,111,500 across the UK.

The City of London contributes 2.4% to the national income, while financial services represent 19.5% of total national income in the whole of London.

The financial services sector accounts for 10% of the total national income of Great Britain. Staggering figures when you think that this is just one industry we are talking about.

The financial services sector as a whole made a total tax contribution of £63bn in the tax year to March 2011, representing 12% of total government tax receipts.

As the largest international banking centre in the world, with banks in the UK accounting for over 20% of global cross-border banking business, the City is an important attribute to the UK as a global player.

Total banking assets in the UK, at around £8 billion, are equivalent to more than five times the country’s total GDP.

Most of the world’s largest banks have their international business activities in London, including many foreign banks. In fact foreign banks in the UK currently employ around 124,000 people. By whacking an almighty tax on these banks, what is to stop them simply moving elsewhere?

Stamp duty is already paid on almost all financial transactions made already in Britain and is rightly under the onus of the UK Government.

Essentially the FTT is more than just a big earner. Politically it is a pivotal and schismatic blow that if pushed through could change the course of the EU forever.

It's hard to understand why we don't just follow the Swiss model and stay well away from the European Union. Last year Switzerland was ranked the wealthiest country in the world per capita. Its ranked 8th in the world in terms of GDP per capita, according to the World Bank and IMF and last year the Swiss Franc is one of the world's strongest currencies with the lowest inflation rate of 0.7%

It has one of the lowest rates of taxation in the developing world and an extremely felxible job market with one of the lowest unemployment rates in the world. Switzerland has free trade agreements worldwide and is home to some of the world's biggest companies. She continues to trade with the EU freely yet has resolutely blocked EU membership every time Brussels comes crawling.

Whether or not the UK would be like Switzerland if we were to leave the EU is unclear. But one thing is for certain. We would be a lot better off out.

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