Shadow chancellor John McDonnell has indicated that the Labour party would propose a new financial transaction tax to raise money for the Treasury.

McDonnell was speaking in response to a new report by Intelligence Capital, which calls for the UK to take a longer term view of how the finance sector operates, describing “fast finance” as “fundamentally flawed”.

The study, Reinforcing Resilience: Making the UK a Citadel of Long-Term Finance, includes a preface by Professor Avinash Persaud, the advisory firm’s founder, who is also a senior fellow at London Business School and the non-executive chairman of London investment bank Elara Capital.

McDonnell said: “As Avinash Persaud says, we need to move beyond a world dominated by fast finance. This report presents one way to achieve that: through a comprehensive financial transactions tax that doesn’t leave loopholes for major areas of financial activity.

“The report shows that a comprehensive financial transactions tax can raise revenue for our under-resourced public services, improve the resilience of financial markets, and ensure that finance serves the people and the wider economy,” he continued. “We’ll carefully consider the report, which builds on Professor Persaud’s 2017 paper, as we continue to develop our plans for an economy underpinned by responsible, sustainable investment.”

However, McDonnell’s comments were met with a negative response from financial services sector trade association, UK Finance.

“This proposed financial transaction tax is a tax on growth that will ultimately hit savers, homeowners and SMEs,” said UK Finance chief executive Stephen Jones. “Financial services paid over £75bn in tax last year and accounts for more than one million jobs nationwide.

“At a time of great uncertainty for business we would encourage policymakers to focus on proposals that would support the growth and competitiveness of the UK's financial sector, helping the industry to grow and employ more people right across the UK.”

The UK currently has a form of financial transaction tax, which applies to the purchase of shares. In its 2017 General Election manifesto, the Labour party advocated extending this tax to cover corporate bonds, and equity and credit derivatives transactions.

The Intelligence Capital report suggested that extending the tax to include certain forex, interest rate and commodities transactions would raise £2.13bn.

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