HC Deb 28 January 2004 vol 417 cc353-4W
Mrs. Curtis-Thomas

To ask the Chancellor of the Exchequer what assessment he has made of the implications of taxing currency speculation. [150783]

John Healey

The Government remain to be convinced that a tax on currency speculation would be particularly effective in stabilising international capital flows. Indeed, a report by the European Commission—"Responses to the Challenges of Globalisation", February 2002—concludes that a currency transaction tax may actually increase volatility, since trading volumes would be likely to fall significantly following its introduction.

There are also a number of practical issues concerning the coverage and enforcement of a currency speculation tax that would need to be resolved before, as is often suggested, it could become a feasible source of development finance. In particular, the Government are concerned that it would be almost impossible to achieve global coverage for such a tax, creating huge scope for evasion. Even if we could secure agreement among the G7, without global application speculative foreign exchange transactions would gravitate to those jurisdictions which did not enforce the tax. This would make poorly regulated offshore financial centres more attractive to speculators, increasing the threat of instability in the financial system.

The Government are open to exploring the full range of options for raising finance for development and the Chancellor has proposed the International Finance Facility, a new mechanism which would raise significant additional resources. The Facility would be built on developed countries' long-term commitments to increased aid flows and, on this basis, would leverage additional resources from international capital markets. The Facility would seek to double aid from US․ 50 billion a year today to ․100 billion a year in the years up to 2015—the sum needed to meet the internationally agreed Millennium Development Goals.

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