UK PM's call for transactions tax gets the cold shoulder

Introducing a Tobin Tax “is very difficult for a range of reasons, in fact it is impossible,” he said.

The IMF, which is due to give its report next April, is working on producing a different, “better” solution — a tax which would “curb risk-taking in the financial sector” and make bankers “take fewer risks because it will cost them more, while at the same time creating a reserve fund which could be used in a crisis.”

Brown said that as financial institutions began to emerge from the chaos of the crisis sparked by investment on risky subprime loans, a new “social contract” with banks was required to make them more responsible to society.

He added: “It cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us.”

He said a global levy on transactions was one way of bringing banks to account. Other options put forward by Brown included an insurance scheme.

Although he warned of the danger of imposing “prohibitive costs” on the banking sector, he added: “I do not think these difficulties should prevent us from considering with urgency the legitimate issues.”

Brown stressed Britain would not act alone on such a tax, saying it would also have to be implemented by all the world's major financial centers.

Unless it was globally applied, it would be ineffective because it would be seen as penalizing banks in countries where it was in operation, causing money to flow to nations without such a tax.

Brown at least got support from France, whose finance minister Christine Lagarde said it would be “a very good thing”.

Campaigners also welcomed Brown's proposal, with Oxfam saying it signaled that “payback time for banks could be just around the corner”.

“A tax on banks would be a major step towards clearing up the mess caused by their greed,” the group's senior policy advisor Max Lawson said.

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