Labour pledges to introduce 'Robin Hood tax' on the City

Labour is pledging to impose a "Robin Hood Tax" on financial transactions if the party gains power on 8 June.

Shadow chancellor John McDonnell said the levy would bring in up to £26 billion in five years, which would be invested in public services.

But the move could cause an outcry in the City - which is already facing uncertainty over Brexit - as the proposal could undermine competitiveness in the sector.

Should Labour win the General Election, the party would revise the 322-year-old stamp duty regime on share-trading which would close down an existing "loop hole" for banks and hedge funds. The move would be extended to cover financial "derivatives" and other highly-traded assets.

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."

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.

The pledge comes after Labour came under pressure to explain how it will pay for its programme of re-nationalisations and expanding public services, set out in a leaked draft of the party's election manifesto.

The party also said it would carry out "the biggest crackdown in this country's history" on tax avoidance, with a comprehensive programme of tax reform.

As part of the 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.

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.