Axe non-dom tax or City will suffer says Livingstone

The Mayor said he was lobbying the Chancellor to ditch plans to slap foreign workers resident in Britain with a £30,000 annual fee.

He argued the Government could "not afford to get it wrong, "especially given the amount of money the City raises for the Treasury.

Mr Livingstone joins a growing chorus of criticism aimed at Mr Darling's plans - to be introduced in this April. They will require foreign citizens resident in Britain for more than seven years to either pay tax on their offshore income or pay the £30,000 fee.

In a speech at today's "The Global Capital" conference the Mayor said concessions made so far by Mr Darling had not gone far enough to satisfy London's financial sector.

"You want to maximise the tax take you get whilst not driving anyone away. That's the skill of the Chancellor: to get that balance right.

"If you go too far in one direction you damage our economy, if you don't go far enough you won't be able to sustain the level of investment you need," he said.

The Mayor stressed the Chancellor needed to recognise that "London now generates more income for them than the entire of British manufacturing."He added: "They can't afford to get it wrong."

Mr Livingstone will make his views clear when he joins business leaders at a forthcoming meeting on financial services with the Chancellor.

A spokesman for the Mayor said he was also deeply opposed to the Conservatives' plans for a £25,000 levy on non-doms.

Leading universities also warned the removal of tax privileges for nondoms would make it harder to recruit experts from overseas and starve off donations from wealthy benefactors.

Malcolm Grant of the Russell Group of top universities and provost of University College London said proposals "would potentially undermine some very long-term strategic planning that universities had been doing" to attract overseas talent.

Anthony Thompson, Tax and Private Capital partner at LG said: "Jurisdictions such as Switzerland, Monaco, Singapore and Dubai must be delighted by the proposals as they anticipate a flood of people and businesses relocating. The non-dom community generate significant revenue for 'UK PLC' and cost it little.

Criticisms of the non-dom tax came after it was revealed London is facing a critical six months which will determine whether it remains the world's financial capital.

The City of London analysis, which ranks the competitiveness of financial centres, shows the capital is only slightly ahead of New York as the world's favoured place to do business.

The gap between the two cities - calculated using a rating scheme based on experts' views of business conditions - has halved since the autumn and stands at just nine points.

Confidence in London has slipped dramatically while New York's appeal has remained virtually static despite the crisis in the US over "sub-prime" mortgages and recession fears.

Experts say the results of the Global Financial Centres Index mean London faces losing its top ranking unless ministers respond with vital economic decisions over the next six months.

They indicate the next Budget and the Government's review of the Bank of England and the Financial Services Authority will be crucial to restoring faith in the business world.