George Osborne’s appeal against an European tax on financial transactions has lost its legal challenge.
Known as the Robin Hood or Tobin tax, the Treasury launched its objection last year, fearing London’s status as a leading financial services centre could be damaged by the financial transaction tax (FTT).
However, the European Court of Justice rejected the plea today and described the challenge as ‘premature’. ‘The Court dismisses the United Kingdom's action,’ it said in a statement.
‘The Court finds that the contested decision does no more than authorise the establishment of enhanced cooperation, but does not contain any substantive element on the FTT itself.’
The FTT will be adopted by 11 states: Germany, France, Spain, Italy, Austria, Belgium, Greece, Portugal, Slovenia, Estonia and Slovakia.
The Treasury argued that UK firms which trade with London branches of banks based in these 11 domiciles could be adversely impacted.
The UK indicated it was prepared to take further legal action following the ruling.
A Treasury spokesperson told the BBC: ‘The government is determined to continue to ensure that the interests of countries outside of the single currency, but inside the single market, are properly protected.’
Mark Boleat, chairman at the City of London Corporation (CLC), backed a fresh challenge.
‘The FTT as it currently stands is an extra-territorial tax which will damage the UK’s recovery and potential for growth, and the UK government is absolutely right to fight its introduction,’ Boleat said in a statement.
‘The governments pushing for the tax have already admitted that it is imperfect; it is time to let go of this punitive measure which will damage the savings of hardworking EU citizens and focus on effective fiscal policy which can create a thriving and sustainable banking culture.’
CLC estimates the FTT in its current form would cost the UK £3.6 billion even though the UK is not planning to participate.
‘The UK’s economic recovery has been hard-fought; it should not be stalled by a £3.6 billion tax on British household savings,’ Boleat said.
The Confederation of British Industry (CBI) was also scathing. 'This decision about legal procedure doesn’t change the fact that the financial transactions tax will damage growth, jobs and investment across Europe,' CBI chief policy director Katja Hall said.
'It will have a far-reaching impact on non-participating member states, by including extra-territorial reach into financial services activity conducted in the UK.'
'As the UK’s largest single trading partner, a healthy European economy is in everyone’s interests so we urge that this damaging tax is re-considered.'