House of Lords EU Committee Denounces FTT

The House of Lords EU Committee has published a report into the European Commission's (EC) proposals for the EU's seven-year budget – the Multiannual Financial Framework (MFF).

The Committee slammed plans by the EC to use a Europe wide Financial Transaction Tax (FTT) to fund the 2014-2020 EU Budget. The Committee says the EC has ‘failed to make a case for the tax’ and suggests if it were introduced the UK could account for 71% of the revenue it would raise.

The Committee is also of the views that a new FTT would target only one sector of the economy and is not genuinely linked to EU policy objectives.

The report concludes that the EU must show overall budgetary restraint, with reductions proposed in areas such as the Common Agricultural Policy (CAP), but suggests that in some areas of European expenditure there may be scope for higher budgets, for example to encourage growth and innovation.

Proposals for a Europe-wide FTT have been rejected by prime minister David Cameron, who says the UK would only join such a levy if it was imposed globally. However, some other EU leaders have been campaigning for the FTT, including France's Nicolas Sarkozy, who has said he will introduce it if he wins the presidential election.

Commenting, Lord Roper, chairman of the House of Lords EU Select Committee, said:

‘The next MFF will be in place until 2020 and will dictate much of what the EU does for the next decade. Given the euro area crisis, it is vital that the European Union gets this right.

The EU's focus now should be on encouraging growth. This is especially important when many member states are struggling with austerity measures and stagnant economies.’

This report follows the Committee’s earlier report on the EU-wide FTT proposals,Towards a Financial Transaction Tax?