People with genuine concerns are welcome to discuss them with us." He said the first of the taxes would not impose additional burden on companies affected.The Government published the proposals on Thursday, prompting Resolution, the closed life book consolidator, to issue a statement on Monday, warning it was unsure what the effects would be on the company. Commenting on the method in which the rules were implemented, a Treasury spokesman said: "We do not consult before anti-avoidance measures are introduced but we do listen to representations on the draft legislation. The first applies to surpluses generated by life insurers which have demutualised at some stage in their history, while the second relates to assets of life insurers which do not have substantial with-profits businesses. Legal & General will fully support such measures."The Treasury said L&G's estimates were grossly overstated and it would provide clarification of the effects of the measures at next month's pre-Budget report.The Association of British Insurers, the trade body, was also quick to criticise the Government yesterday. Peter Vipond, its director of financial regulation and taxation, said: "We are disappointed and concerned at the way these proposals have been introduced and believe they are flawed.

Those flaws will have a very negative impact on the profitability and solvency of some life funds."The controversy centres on two taxes which target the reserves of life insurers. "Our accumulated reserves have been built up over many years and include funds which have already been taxed. It is our understanding that the industry will be lobbying strongly to have this draft legislation withdrawn or amended. Legal & General conceded yesterday it may be one of the companies worst affected by a new tax on life insurers, which the Government unexpectedly sprung on the industry without consultation last week. In a Stock Exchange announcement yesterday morning, L&G said it could take a one-off hit of as much as £500m as a result of the tax, more than 40 per cent of its pre-tax profits last year. Sir David Prosser, the chief executive, expressed his anger at the way the Government had published the proposals without consultation, lending his support to the industry's lobbying efforts to have the tax scrapped or amended."The Government is proposing retrospective taxation on reserves which provide security for this industry's customers," he said.

The LSE is also the target of a long-running takeover battle, with a ruling from the Competition Commission on bid proposals from Deutsche B? and Euronext expected by the end of the month.. Michael Elias, a spokesman, said: "It is now up to the financial community in Europe to act in a more co-ordinated way to support this initiative from AIM and for Europe's policymakers to create the necessary conditions for this to be successful so that Europe's companies of the future can thrive."The new challenge comes after the LSE launched a drive this year to attract more Chinese companies on to its market. Only 37 businesses on AIM hail from Europe, but that number is creeping up - the Italian fuel cell company, Acta, and Germany's SQS Software have joined in the past week. Since its launch in 1995, almost £20bn has been raised by AIM companies.Speaking at yesterday's Risk Capital Summit in London, Mr Gibson-Smith said the LSE had started talks to create networks of investors, financial advisers and intermediaries in a drive to broaden AIM's appeal across Europe.

"Local nominated advisers across Europe will act as a pipeline for companies coming to AIM and local member firms will provide liquidity, ongoing rese-arch and local distribution to investors," he said.The European Private Equity and Venture Capital Association welcomed the news. Europe is crying out for a single equity-market solution for smaller, growing companies - the engine room of economic success." He said AIM was the second-largest European market by number of companies, with 1,318 listings, after the LSE's main market. It could boost the EU's economy by between 0.3 and 0.6 per cent - up to €57bn (£39bn) a year - according to research published by Oxford Analytica. The study predicts that AIM could treble in size. Calling for the support of the European Commission and governments, the LSE's chairman, Chris Gibson-Smith, declared yesterday: "We are certain the opportunity for AIM is huge. The London Stock Exchange is planning to transform its junior AIM platform into a pan-European market for small and medium-sized companies to raise capital. The move would mean hundreds of foreign companies listing on the Alternative Investment Market over the next few years. JP Morgan estimated that £20m could come from selling Boots' own-label toiletries through Alliance UniChem's outlets..

"The acquisition-driven strategy does provide a medium-term platform that Boots would lack," they added, reiterating their "outperform" recommendation.On top of cost savings from crunching together two retail pharmacy chains in the UK and slimming down Boots' head office in Nottingham - 1,000 jobs are tipped to go across the companies - there is the potential of further savings from revenue synergies. "The short-term risks are regulatory," he added.Retail analysts at JP Morgan also threw their weight behind the deal. They argued that while the merger dilutes shareholders' exposure to growth from the UK pharmacy market - granted that the Government wants to give chemists a bigger role in the provision of public health - the deal would reduce the companies' dependence on UK consumers. He was won over by the promise of £100m savings from cutting costs in the UK and the prospect of "increased firepower" for the enlarged group to complete overseas deals. Boots' stock slipped 2p to 631p, but remained higher than before the deal was announced. Sir Nigel Rudd, the proposed chairman of the new group, and Stefano Pessina, who would become executive deputy chairman, succeeded in getting the backing of Morley Fund Management, which is among the top investors in both companies.One fund manager at Morley declared the merger case was "sound".