UK – Chancellor Gordon Brown’s five billion pound (7.3 billion euro) tax on dividend income paid by pension funds has been described as a threat to the position of the City of London – the UK’s financial heartland - by London Stock Exchange chief executive Clara Furse.

Pension funds also pay one billion pounds a year in stamp duty on share transactions and taxes on property deals, she said, speaking in London last night. “And people think that pensions are tax free vehicles!” She also pointed to the huge jump in the tax burden on business which had jumped from 270 billion pounds to 400 billion pounds.

Business in the City was also under threat from public attitudes, as it was left out of public policy debates. City issues were not discussed in the media other than in terms of job cuts, mergers and acquisition deals in national news coverage. In the Brussels context the financial services action plan was unfolding without sufficient attention being paid to it.

Stamp duty should be abolished to increase the competitive situation of the City in Europe, Furse said. She accused treasury ministers of being complacent in their lack of response to questions from the City. The situation was different in the US, where tax on trading had been halved and it is proposed to cut dividend taxes to encourage the markets.

“The interests of the City are suffering because as we have not been celebrating our successes,” said Furse. The businesses in the financial sector had taken tough decisions and was efficient in contrast with some other countries in Europe.

Furse expressed concerns for the smaller quoted company sector if the Higgs proposals for corporate governance applied to them. The move to require quarterly reporting for quoted companies as mooted in recent European Directives would following a misleading US model. She questioned the benefits of this given the flow of real time information now coming through from companies. The burden of quarterly reports would fall on smaller companies. “It is not necessary to do this.”

The City must maintain its competitive edge, she declared, saying the exchange would play its part, in the development of equity trading as the world moved towards global capital markets. Some 56% of international equity trades were through London. “It is the place to be and to do business.”

Furse was addressing the UK Society of Investment Professionals, the UK member of AIMR, whose chairman Nicola Ralston, pointed out that there were 377 successful UK candidates for the Chartered Financial Analyst qualification, as well as 17 qualifying for the IIMR Associate examination, in this its last year.

Topics