Chancellor George Osborne has reiterated the UK's opposition to the planned EU Financial Transaction Tax (FTT), which he describes as 'poorly designed, badly timed' and, 'unlawfully extraterritorial'.

Osborne's remarks come in a letter sent to Guido Ravoet, chief executive of the European Banking Federation (EBF) in which he says the proposed tax has 'numerous design flaws' These include the lack of an exemption for market making, unlike UK stamp duty, which the Chancellor says is needed to mitigate the 'cascade'effect and so reduce distortion.

In the letter Osborne says an FFT in its current form would hinder EU growth by disrupting the diverse markets used by corporates to raise finance for long-term investments and to hedge risks. He maintains it will undermine the principle of the single market, by splitting the tax treatment of derivatives into two regimes and so distorting competition, and also claims the proposals conflict with G20 regulatory reforms 'in numerous ways'.

In conclusion, Osborne says that if the proposed FTT is to succeed, it must be 'significantly scaled back', and have growth as its key objective.

Osborne's letter to Ravoet was a reply to a letter which the EBF and other banking organizations sent to European finance ministers via the Economic and Financial Affairs Council (ECOFIN). The EBF believes that the FTT put financial service operators within the FTT zone under 'extremely high pressure.'>