Labour has pledged to raise £26 billion from the City of London with a so-called ‘Robin Hood’ tax if it wins the election in June.
The tax on financial transactions would bring in £4.7 billion per year, Labour claims.
Labour’s London Mayor Sadiq Khan has previously branded the tax ‘madness’.
But Shadow chancellor John McDonnell (pictured) said the tax would ‘make the financial sector pay its fair share,’ following the damage of the financial crisis.
The party seeks to impose the tax by ‘tackling a couple of loopholes’ for banks and hedge funds and extend stamp duty to 0.5% per trade paid on shares to other financial assets such as derivatives. It claims this would raise £26 billion over the next parliament.
Labour said it would end an exemption, known as intermediaries relief, that applies to some banks and hedge funds. It said the measures would together raise £4.7 billion - £5.6 billion a year.
‘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 contribution...to fund our public services,’ said McDonnell.
The Institute of Economic Affairs attacked the plan, which was described as a 'shambles' by the Tories.
'[This is] another example of the fallacy that corporations can be tapped for cash with no wider costs,' said the think tank's chief economist Julian Jessop.
Tax avoidance crackdown
Alongside this measure Labour said it wants closer scrutiny of wealthy individuals' tax affairs.
Anyone earning more than £1 million a year to publish their tax returns, under the plans.
This would be among a series of anti-tax-avoidance measures McDonnell said would bring 'fairness' to the tax system.
Others include increasing the number of people investigating the tax affairs of the wealthy, banning companies involved in tax avoidance from public contracts and sanctions against 'abusive' tax havens. Labour will also demand MPs publish details of any offshore financial interests.