Labour says 'Robin Hood tax' would raise £26bn

Shadow chancellor John McDonnell says new levy would help NHS, but critics warn it could hurt pensioners and cost jobs

John McDonnell
(Image credit: Ben Pruchnie/Getty Images)

Labour is continuing to clarify how it will fund tens of billions of pounds of spending pledges if it wins the election, confirming today its support for a so-called "Robin Hood tax".

Shadow chancellor John McDonnell says the tax would raise around £5bn a year and £26bn in total over the next parliament.

This would help to pay for a host of new commitments, including today's announcement that the party would spend another £37bn on the NHS over the course of the next five years, including on IT system upgrades.

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The concept of a financial transactions tax evolved out of ideas for a tax on short-term currency trades in the 1970s. It has gained popularity since the financial crisis.

A popular campaign for a Robin Hood tax would see a tiny levy of 0.05 per cent applied to all transactions to raise "£250bn a year globally".

Labour's tax is higher at 0.5 per cent and is effectively an extension of a stamp duty that already applies to purchases of listed company shares.

"Labour's estimate of £4.7bn in revenue for 2016/17 is predicated on a tax rate of 0.2 per cent of the value of transactions for banks, hedge funds and other financial companies, and 0.5 per cent for non-financial businesses," says the Financial Times.

McDonnell said: "We bailed out the City 10 years ago when the crash came, we poured hundreds of billions of pounds into it. Since then £100bn has been given out in bonuses in the City.

"So we are asking for a small fund our public services."

Several think-tanks have "warned that pensioners and savers with investments would be hit as much as bankers, while the public would face higher interest rates as a result," says the Daily Telegraph.

Julian Jessop, chief economist at the Institute of Economic Affairs, says: "The increased costs would inevitably be passed on to customers, including small investors, in the form of higher charges, and to borrowers in the form of higher interest rates.

"Non-financial firms will find it more expensive to raise capital and manage risk, which will undermine the economy further.

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

Labour's own Sadiq Khan, who is the mayor of London where most of the affected UK financial transactions would take place, has previously called such a levy "madness".

The BBC says concern over the tax would add to worries over a loss of business from the City in the wake of Brexit.

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