Labour's Robin Hood tax 'would raise £26bn' - but Tories say it would lead to job losses

However, the plan is likely to cause an outcry in the City amid fears it will undermine the competitiveness of the financial sector at a time of uncertainty in the wake of the vote for Brexit.

Labour’s Sadiq Khan, the London Mayor, has already come out against a unilateral transaction tax, describing it as “madness”.

The Conservatives warned that it would lead to the loss of jobs and economic growth.

Labour, which will unveil its detailed plans at its official manifesto launch on Tuesday, has proposed the new tax after coming under pressure to explain how it would pay for its ambitious programme of re-nationalisations and expanding public services, set out in a leaked draft of its election manifesto last week.

The party said it would revise the 322-year-old stamp duty regime on share trading, closing down an existing "loop hole" for banks and hedge funds, and extending it to cover financial "derivatives" and other highly-traded assets.

At the current rate of 0.5 per cent per transaction, the party said the move would raise £4.7 billion in 2016/17, rising to £5.6bn in 2021/22, the final year of the next parliament.

It said the proposal mirrored the financial transactions tax currently being prepared for introduction in 10 European countries.

At the same time, Labour explained that it would carry out "the biggest crackdown in this country's history" on tax avoidance, with a comprehensive programme of tax reform.

Following the disclosures in the leaked "Panama papers" in 2015, it said it would clamp down on the network of secretive shell companies and offshore tax havens used by the "super rich" to shield their wealth.

Among the measures planned is a new requirement on large companies and wealthy individuals earning more than £1m to publicly file their tax returns.

Mr McDonnell said the changes would restore "fairness" to the system after the bail-out of the banks following the financial crash of 2008.

"The next Labour Government will introduce a 'Robin Hood Tax' to make the financial sector pay its fair share after it received huge public bailouts in the crash.

"Ordinary people are still being made to pay by the Tories for a crisis they didn't cause through the worst spending cuts for generations.

"All we're asking for is fairness in our tax system. By making those who trade in financial derivatives pay a small fraction of their profits, we can help properly fund our public services," he said.

For the Conservatives, Jane Ellison, the Treasury Minister, dismissed the plans as a "total shambles" from Jeremy Corbyn.

"The transaction tax has been described as 'madness' by his own Mayor of London because it risks economic growth and jobs, and just weeks ago in Parliament Labour blocked measures to stop almost £9bn worth of tax avoidance," she said.

The Institute of Economic Affairs free market think-tank said it was "naive" to think a financial transactions tax would only hit banks and speculators and warned the costs would "inevitably" be passed on to customers.

"This is another example of the fallacy that corporations can be tapped for cash with no wider costs, " said IEA chief economist Julian Jessop.

"In reality, it's always ordinary people who ultimately pay, including consumers and workers. Sherwood Forest wasn't made of magic money trees either."

But David Hillman, spokesman for the Robin Hood Tax Campaign, said: "This is welcome evidence of growing support for a Robin Hood Tax. The money raised could make a huge difference to the poorest and most vulnerable people across the country.

"Our research shows that, if used in the right way, this extra £4.7 billion a year could plug last year's NHS funding gap, fix the social care crisis and hire 20,000 new teachers with money left over to build more than 70,000 affordable homes.

"This could change many people's lives for the better and is needed now more than ever."

Mr McDonnell defended the policy from claims it would damage the City, saying the tax was about "tackling a couple of loopholes" in the system.

He told Sky News' Sophy Ridge on Sunday: "It's not about punishing bankers or anything like that, it's simply, correcting basically, tackling a couple of loopholes that there is in the existing system.

"Circumstances have changed, this is the right time to do it.

"This is a small transactional tax. We are asking a small contribution from the City. You know look - 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."

Meantime, the Shadow Chancellor insisted that as voters learned more about Labour’s policies the opinion polls, which have the Tory lead anywhere between 14 and 20 points, would turn round in his party’s favour.

"What I'm saying now is we're in a general election campaign, we're going to win; the polls are showing that because our policies are so promising and on the basis of that you'll see Jeremy Corbyn in Number 10, full stop," he told Sky News.

Mr McDonnell refused to be drawn on whether or not Mr Corbyn would remain as Labour leader even if the party slump to a damaging defeat on June 8.

"This is a daft question. When someone's about to start a race you don't go up to them and say 'are you going to win or lose? what are you going to do at the end?'. We're in the middle of a race and we're fighting it hard. Yes, we've improved in the polling this week and I think that you'll see that in the next few weeks itself and I think we're in it to win, full stop."

Labour’s Robin Hood Tax policy came as Theresa May unveiled Tory proposals to support local authorities in building a new generation of council homes to help fix the "broken" housing market south of the border.

The party said it expected "thousands" of new homes to be built each year in move that will be seen as a symbolic break with the legacy of Margaret Thatcher who introduced right-to-buy - although tenants will eventually be able to purchase the properties.