BUSINESS Secretary Vince Cable told MPs that he believes there is a case for introducing a financial transaction tax (FTT).

Despite fierce Government opposition to a European bid to introduce such a levy, the Liberal Democrat Cabinet Minister said he was “quite disposed” to use it as a way of trying to change behaviour in the financial sector.

“I have got no objection to the... well, I would put it more positively – I think there is a case if you are trying to change behaviour from using a market instrument of that kind to make it happen,” he told the Commons Business, Innovation and Skills Committee.

The European Commission has tabled controversial plans for an FTT despite the opposition of a number of member states, including Britain. It will apply to transactions involving shares, bonds and derivatives and could raise up to £30.2bn a year.

The UK opposed the scheme and will not be participating in it, but is currently studying the draft proposals to assess their possible impact on the City.

Mr Cable added: “The reason why the British Government has been pretty negative about it is mainly on grounds of practicality and the other reason we have been sceptical about it, of course, is that most of the revenue would be generated in the UK and under the European Union’s proposal would be repatriated to Brussels, which understandably, we are not too happy about.”

The Tobin tax, named after the economist who devised it, is aimed at raising public funds and encouraging more responsible trading by financial institutions.

Mr Cable told the committee that countries such as Hungary, which has implemented its own financial transaction tax, had found they only reaped about a fifth or a quarter of what they expected because it was very difficult to pin down the transactions.

He said: “I think there is a case and I’m in some ways quite disposed to it.

“I originally worked on Tobin tax concepts 20 or 30 years ago, long before I came into this place.

“I think the problem all along has been implementing it where you have very rapid electronic transactions, where cross-border transactions are very difficult to trace.”