Labour’s £26bn tax on City

LABOUR today announces a £26 billion raid on the City of London as it promises to implement a “Robin Hood tax” if it wins office next month.

The tax will mean 0.5 per cent of the value of bonds and derivatives sold goes to the Treasury.

There was an immediate backlash from free-market think-tanks which warned it was a “delusional” and “naive” economic policy. They said that pensioners and savers with investments would be hit as much as bank- ers, while the public would face higher interest rates as a result. There were also fears that the tax would trigger a flight of financial workers because “traders aren’t going to stick around if there’s no money to be made”.

Labour leaders have said they want to fund a wave of public spending by raising taxes on the richest 5 per cent of people if they win the election.

Speculation that the party was

preparing a major wealth tax appeared misplaced when a leaked Labour manifesto obtained by The Daily Telegraph made no mention of one.

However, John McDonnell, the shadow chancellor, said: “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.

“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.”

A Labour briefing cited backing for the idea from Bernie Sanders, the Leftwing Democrat presidential contender who failed to beat Hillary Clinton to the nomination, to support its case.

It also said that similar financial transactions taxes were currently being prepared for introduction in 10 other European states.

Under Labour costings, the tax would have raised £4.7billion in 2017 before rising to £5.6billion in 2022 – or £26billion over the course of the fiveyear parliament.

Jane Ellison, the financial secretary to the Treasury, said: “This is a total shambles from 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.

“Since 2010, we have recouped an extra £140 billion in tax that would have otherwise been avoided or evaded. Under the strong and stable leadership of Theresa May, we will relentlessly go after those who do not pay their fair share.”

Free-market think tanks criticised the tax and warned it could be counter-

productive if ever implemented. Julian Jessop, chief economist at the Institute of Economic Affairs, said: “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.”

Alex Wild, research director of the TaxPayers’ Alliance, said: “The idea that vast sums can be raised simply by ‘clamping down’ on tax avoidance is as delusional as the idea that politicians and bureaucrats are capable of setting an optimal level of trading.”