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MPs call for UK financial transactions tax
The Business Select Committee has caused dismay in the City by including demands for a Financial Transactions Tax (FTT) as part of its response to the Kay Review on corporate governance.
In a report that calls for the Government to implement the Kay recommendations, MPs have called for the Government to consider imposing an FTT to help reduce high frequency trading.
Professor Kay, whose report into short-termism in equity markets was published last year, did not contain any mention of the FTT. But Adrian Bailey, chairman of the Committee, said he had found support for the tax during evidence sessions. “The Government should assess the likely impact of the introduction of a Financial Transaction Tax and how the obstacles to its implementation can be overcome,” he said.
Simon Walker, director general of the Institute of Directors, said he shared the MPs “desire to get moving with the recommendations of the Kay review.” But he added: “The Committee is wrong to call on the Government to look at implementing an FTT, which was not recommended by the Kay Review.” He added: “A tax on financial transactions will catch not only bankers but also businesses, pension funds and bank customers up and down the country.”
Brussels’ efforts to impose an FTT across the EU have been met with stiff opposition in London. The Chancellor has vowed to block any attempt to impose the controversial tax which has been blamed for driving business out of countries where it has been tried, including France.
Less controversially, the MPs urged the Government to “pick up a regulatory stick” to ensure that Professor Kay’s 17 recommendations are implemented.
The Kay Review called for a “more expansive form of stewardship” of companies by directors and shareholders; an investors’ forum to facilitate collective engagement; and for the Government to review the “scale and effectiveness of merger activity”. Mr Bailey said: “It is not enough for the Government to simply say it supports Kay’s recommendations and then leave it to the industry to change of its own volition. The Government must set measurable, accountable targets through which reform can be driven and measured.”
Separately, the Association of British Insurers, said it planned to start an “Investor Exchange” to help co-ordinate activism with all shareholders, not just its own members. In a report published today, the ABI also called for companies to hire more “expert” non-executive directors and ask key board members to work more hours. The ABI said that in bid situations, company directors should have their own team of impartial advisers that could help reduce the number of value destroying takeover deals.