UK ‘would raise 75pc of financial tax revenue’

Supporters of a European FTT claim it would generate public revenues and regulate financial markets. They also argue it will have a stabilising and regulating effect on the markets, because it would reduce harmful speculation.

However, Prime Minister David Cameron has described European Union plans for a financial transactions tax as “madness” at a time when measures were needed to promote growth.

An Ernst & Young spokesman said: “The European Commission (EC) has not published detailed revenue estimates of the FTT at a national level, but the EC acknowledges they would be distributed unevenly in line with trading volumes at EU exchanges. The Ernst & Young Item Club has used the information provided by the commission to consider the impact on the UK in two scenarios, the introduction of the FTT across the EU including the UK and the scenario if the UK opts out.”

Neil Blake, senior economic adviser to the Item club, said: “Taking the EC’s estimates at face value, if the FTT is introduced across the EU, the UK financial sector would generate around 75 per cent of the total revenues.”

Even if the UK opts out, if a reverse charge mechanism was applied, the UK financial sector would contribute around 60 per cent of total revenues, Ernst & Young’s research suggests.

In January, Mr Cameron issued a warning to France that the UK could reap the benefit if it went ahead with a national levy on bank transactions.

He said Britain’s door would be open to any French banks wishing to leave the country to avoid paying the FTT, which French president Nicolas Sarkozy has vowed to introduce if he is re-elected in May.

The Prime Minister and Chancellor George Osborne have insisted the FTT can only function if it is applied globally, to ensure a level playing field in the banking sector.

They have refused to take part in a tax at EU level for fear of driving European banks to trade outside the union’s jurisdiction.