Labour unveils £26 billion 'Robin Hood Tax' on City of London to pay for public services

Robin Hood Tax: Labour has announced plans to raise billions through a tax on the City of London
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Labour will target the City of London with a “Robin Hood Tax” on financial deals to raise money for public services if it gains power in next month’s General Election.

Jeremy Corbyn’s party said the levy would pull in as much as £26 billion during the next parliament.

The pledge comes after a leak of Labour’s draft manifesto revealed spending plans that include state ownership of railways and a reversal of some welfare reforms.

The move to target the City is likely to cause an outcry amid fears it will undermine the financial sector at a time of uncertainty following the Brexit vote.

City of London: Corbyn's Labour plan to introduce 'Robin Hood Tax' on the city 
Alamy

The Conservatives said it was "madness" and warned it would lead to the loss of jobs and economic growth.

The announcement came as Theresa May unveiled Tory proposals to support local authorities in building a new generation of council homes to help fix the "broken" housing market.

The party said it expected "thousands" of new homes to be built each year in move that will be seen as a symbolic break with the legacy of Margaret Thatcher who introduced right-to-buy - although tenants will eventually be able to purchase the properties.

Labour set out its plan for a financial transaction tax after coming under pressure to explain how it will pay for its ambitious programme of re-nationalisations and expanding public services, set out the party's leaked draft election manifesto.

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 cent 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 it would clamp down on the network of secretive shell companies and offshore tax havens used by the "super rich" to shield their wealth.

Among the measures planned is a new requirement on large companies and wealthy individuals earning more than £1 million to publicly file their tax returns.

Shadow chancellor John 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."

For the Conservatives, Treasury minister Jane Ellison dismissed the plans as a "total shambles" from Labour leader Jeremy Corbyn.

"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.

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 either."

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