Britain’s opposition Labour alarms bankers with Robin Hood tax

London (Reuters): Britain’s left-wing opposition party has held a series of meetings with top finance executives, setting out how it would levy taxes on one of the world’s biggest financial trading centers if it snatched power from Prime Minister Theresa May.

With May’s grip on the leadership weakened by an ill-judged election last month and her Conservative party divided over Brexit, Labour is hoping her minority government will collapse and catapult its socialist leader Jeremy Corbyn into power.

Last week, Labour’s finance spokesman John McDonnell chose the London Stock Exchange – abastion of British capitalism – to invite feedback on proposals, telling leaders his party will form the next government, sources at the meeting said.

Banks in London’s financial hub had paid little attention to relations with the Labour Party since 2015 when members elected Corbyn, a veteran campaigner who is seen as opposing much of what the City of London stands for.

But the industry has been forced to take the party seriously after its much stronger than expected showing in the general election which left May to rely on the support of a small Northern Irish party to prop up her government.

McDonnell told executives from Standard Chartered, the London Stock Exchange, the City of London Corporation, lawyers, lobbyists and accountants in two separate meetings last week about Labour’s proposals to expand an existing tax on shares to include trading on other assets such as bonds and derivatives.

Labour says the tax – proposedto be around half of a percentage point or less on the value of a trade -- could earn 4.7 billion pounds ($6.1 billion) a year. Labour published details of the tax in the run up to the June election.

Banking industry figures are concerned such a tax, debated in Western economies for decades, could exacerbate the impact of Brexit by prompting more businesses to flee London.

Labour wants to use the higher taxes on financial services – Britain’s most profitable industry – tofund increased public spending and end seven years of austerity under the ruling Conservatives.

The proposed levy would be based on a tax of 0.2% of the value of trades for banks, hedge funds and other financial companies, and 0.5% for non-financial businesses.

Britain has the largest foreign exchange market and the second largest derivatives market in the world, accounting for just under 40% of the world’s dealings in those markets, according to the Bank for International Settlements.