By Richard Johnstone | 13 March 2013
Chancellor George Osborne has been urged to tax more financial transactions and use part of the funds to set up a British Investment Bank.
The bank would invest in infrastructure and lend to business, according to the Institute for Public Policy Research. A report from the think-tank, published today, said such a tax could raise as much as £20bn annually. The IPPR suggests it could be levied by charging stamp duty on more transactions.
New priorities for British economic policy, published ahead of next week’s Budget, states that £10bn of the revenue raised should be ring-fenced annually to establish the British Investment Bank.
Stamp duty is currently charged on UK share transactions, at 0.5%. The IPPR said this should be extended to cover all trading of bonds and equities, at a rate of 0.1%, and derivative products at 0.01%.
As many as 30 nations have some form of financial transaction tax, including the US, which has a 0.0013% tax on share trades and a flat fee of $0.004 on trades of securities.
Osborne has insisted that Britain will not take part in plans for a financial transaction tax being established in the eurozone.
However, IPPR chief economist Tony Dolphin said extending the existing tax on share deals could raise revenue to both tackle the deficit and invest in growth. As well as boosting plans to establish a new bank to lend to businesses, the additional funds could be used to reduce the deficit, easing pressures for cuts in welfare and departmental spending, he added.
‘There is an alternative, and this is it. The British economy needs new economic priorities and economists must expose the political fantasy that the only options are more borrowing or deeper cuts. We can raise more revenue, tackle the deficit and kick-start economic growth at the same time.’
