The Robin Hood tax: What is it and why is it loved and loathed?

A debate on the so-called Robin Hood tax has reignited as Labour consider a measure that its supporters say will recoup billions of pounds from the City to help fund public services.

The tax on bank transactions is opposed by Chancellor George Osborne, who believes such a policy could affect City deals.

Here's an outline of the tax, how it would work and why it is so passionately supported and opposed:

What exactly is the Robin Hood Tax?

Officially known as the Financial Transactions Tax, the idea was first put forward by US economist James Tobin in the 1970s to tax foreign currency payments but has since been expanded to cover City transactions like stocks, bonds and derivatives.

Campaigners for the Robin Hood tax claim George Osborne has protected City bankers from contributing to Britain's debt recovery. Credit: Dominic Lipinski/PA Wire

Tobin initially suggested a rate of 0.5%, but other economists have put forward rates ranging from 0.1% to 1%.

Is it close to being implemented?

The European Commission is pushing forward with plans for the tax in 11 European Union member states, including France and Germany.

The UK government - which opposes the tax - took legal action over concerns British financial institutions dealing with the participating member states would be liable to pay the tax.

The European Court of Justice ruled the UK's challenge was premature because detailed plans to implement the tax had not yet been put in place.

Why is it passionately supported?

Economists in favour of the tax say it will reduce the number of risky transactions of money and thus increase financial stability, while raising billions of pounds globally - even at a low rate.

George Osborne and Boris Johnson have said the proposed tax on financial transactions would weaken the City. Credit: Stefan Rousseau/PA Wire

The Robin Hood Tax campaign in the UK has called on banks, hedge funds and the rest of the financial sector to pay the tax to help clear up the huge government debt caused by the 2008 economic crash.

Why is it passionately opposed?

Those against the tax say it will make financial markets less competitive unless globally supported, with fewer transactions that could result in job losses or banks passing on the tax to their customers.

London mayor Boris Johnson is a prominent critic. He has warned the tax could shift business away from the UK and the EU altogether to markets in New York, Hong Kong or Singapore.