• John McDonnell said levy would bring in up to £26billion over next parliament
  • Move likely to face criticism it will undermine competitiveness in financial sector
  • Labour vowed to carry out ‘biggest crackdown in UK’s history’ on tax avoidance

Press Association

Labour is pledging to impose a ‘Robin Hood Tax’ on financial transactions, raising billions for public services, if it gains power in June.

Shadow chancellor John McDonnell said the levy would bring in up to £26 billion over the course of the next parliament, while eliminating the most destabilising forms of speculation on the financial markets.

However the move is likely to cause an outcry in the City amid fears it will undermine the competitiveness of the financial sector at a time of uncertainty in the wake of the vote for Brexit.

John McDonnell said the levy would bring in up to £26 billion over the course of the next parliament

John McDonnell said the levy would bring in up to £26 billion over the course of the next parliament

John McDonnell said the levy would bring in up to £26 billion over the course of the next parliament

It comes as Labour has been under pressure to explain how it will pay for its ambitious programme of re-nationalisations and expanding public services, set out in a leaked draft of the party’s election manifesto.

Under the Labour plan, the party said it would revise the 322-year-old stamp duty regime on share-trading, closing down an existing ‘loop hole’ for banks and hedge funds, and extending it to cover financial ‘derivatives’ and other highly-traded assets.

At the current rate of 0.5% per transaction, the party said the move would raise £4.7 billion in 2016/17, rising to £5.6 billion in 2021/22 – the final year of the next parliament.

It said the plan mirrored the financial transactions tax currently being prepared for introduction in 10 European countries.

At the same time, the party said it would carry out ‘the biggest crackdown in this country’s history’ on tax avoidance, with a comprehensive programme of tax reform.

Following the disclosures in the leaked ‘Panama papers’ in 2015, it said a Labour government would close the loopholes and clamp down on the network of secretive shell companies and offshore tax havens used by the ‘super rich’ to shield their wealth.

Mr McDonnell said the changes would restore ‘fairness’ to the system after the bail-out of the banks following the financial crash of 2008.

‘The next Labour government will introduce a “Robin Hood Tax” to make the financial sector pay its fair share after it received huge public bailouts in the crash,’ he said.

‘Ordinary people are still being made to pay by the Tories for a crisis they didn’t cause through the worst spending cuts for generations.

‘All we’re asking for is fairness in our tax system. By making those who trade in financial derivatives pay a small fraction of their profits, we can help properly fund our public services.’

Mr McDonnell said the changes would restore 'fairness' to the system after the bail-out of the banks following the financial crash of 2008

Mr McDonnell said the changes would restore 'fairness' to the system after the bail-out of the banks following the financial crash of 2008

Mr McDonnell said the changes would restore ‘fairness’ to the system after the bail-out of the banks following the financial crash of 2008

As part of its clamp down on tax avoidance, Labour said it would require large companies and wealthy individuals earning more than £1 million to publicly file their tax returns.

A new tax enforcement unit would be established in HM Revenue and Customs, with a doubling of the number of staff scrutinising the affairs of companies and high net worth individuals.

Tax ‘avoiders’ would be banned from tendering for public sector contracts while there would be strict new minimum standards for Britain’s network of Crown Dependencies and Overseas territories.

There would also be a new levy on UK properties bought from offshore trusts located in tax havens, while the party said it would close the so-called ‘Mayfair tax’ loophole which allows individuals to reduce their tax liabilities by treating interest as capital gains rather than income.

MPs would face greater scrutiny, with new rules on the declaration of offshore holdings in the Register of Members’ Interests while a public inquiry would be held to examine what lessons could be learned from the Panama papers.

Treasury Minister Jane Ellison dismissed the plans as a 'total shambles' from the Labour leadership

Treasury Minister Jane Ellison dismissed the plans as a 'total shambles' from the Labour leadership

Treasury Minister Jane Ellison dismissed the plans as a ‘total shambles’ from the Labour leadership

For the Conservatives, Treasury Minister Jane Ellison dismissed the plans as a ‘total shambles’ from the Labour leadership.

‘The transaction tax has been described as ‘madness’ by his own mayor of London because it risks economic growth and jobs, and just weeks ago in Parliament Labour blocked measures to stop almost £9 billion worth of tax avoidance,’ she said.

‘Since 2010, we have recouped an extra £140 billion in tax that would have otherwise been avoided or evaded. We will relentlessly go after those who do not pay their fair share.’

The Institute of Economic Affairs (IEA) free market think tank said it was ‘naive’ to think a financial transactions tax would only hit banks and speculators and warned the costs would ‘inevitably’ be passed on to customers.

‘This is another example of the fallacy that corporations can be tapped for cash with no wider costs, ‘ said IEA chief economist Julian Jessop.

‘In reality, it’s always ordinary people who ultimately pay, including consumers and workers. Sherwood Forest wasn’t made of magic money trees

The comments below have not been moderated.

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.