UK
28/09/2015 13:26 BST | Updated 12/10/2015 17:59 BST

What Is The Robin Hood Tax?

Britain's shadow chancellor John McDonnell is set to to unveil the Labour Party's backing for the Financial Transaction Tax, more commonly known as the Robin Hood Tax.

But what is it, and what does it mean for the UK?

The idea of Robin Hood Tax was first put forward by US economist James Tobin in the 70s, and was so popular with the public that it became somewhat of a movement.

robin hood tax

It is essentially a tiny tax on the financial sector that places 0.05% tax trades involving stocks, bonds, foreign currency and derivative. If put into action, it could generate £250 billion a year globally.

Campaigners say that the money will be used to fill the 'massive hole' left in the UK's public finances during the recession. They suggest 50% to fight poverty in the UK, 25% to fight poverty in developing countries and 25% to fight climate change at home and abroad.

In the UK, the funds could be used to reinstate Education Maintenance Allowances, save libraries at risk of closure, avoid housing benefit cuts, reduce child poverty and insulate every home.

Around the world, the Robin Hood Tax could help to put every child through primary school and help people to access free healthcare.

As it stands, the financial sector is the most profitable industry on earth -- 26 times more profitable than the average business. Campaigners say that the sector is already under taxed, so it can afford to contribute more into society.

The European Commission is going forward with plans to introduce the tax in 11 European Union countries, including France and Germany.

While many economists are in favour of the tax, which they believe will increase financial stability, the UK government currently oppose it over concerns that British financial institutions dealing with participating member states would be liable to pay the tax.