The Lords EU Committee slammed the financial transaction tax (FTT) scheme and called for the EC to show financial restraint to reflect the austerity being experienced in member states.
The European Union’s budget should rise by no more than inflation in the years to the end of this decade, the cross-party committee said in a report.
Peers also said spending in areas such as the Common Agricultural Policy should be cut, to allow funds to be transferred to measures to stimulate economic growth.
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 were imposed globally.
But other EU leaders have shown an interest, including France’s Nicolas Sarkozy, who has said he would introduce it if he won Sunday’s presidential election.
Yesterday’s report said the EC had “failed to make a case for the tax” as a means of funding its next seven-year budget, to run from 2014-2020.
If it were introduced, the UK could account for 71 per cent of revenue raised because its financial sector far outweighs those in other EU nations, said peers.
The UK Government has also condemned as “completely unrealistic” the seven-year-budget proposed by the Commission.
The Commission says its plans would give the EU an average annual budget over the seven years from 2014 of £125bn a year, amounting to one per cent of the combined Gross Domestic Product of the 27 member states.
But the Treasury says it is an 11 per cent increase and would add £10bn to the UK’s contributions to Brussels over the period.