GORDON BROWN yesterday threw his weight behind a “Tobin tax” on financial transactions as a way of taxing and reining in the banks, despite warnings that such taxes are unworkable.

“We should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society,” he said at the G20 meeting of finance ministers and central bankers in St Andrews, Fife.

The prime minister’s plan appeared to fall at the first hurdle when Tim Geithner, the US Treasury secretary, said: “A day-by-day financial transaction tax is not something we are prepared to support.”

The International Monetary Fund (IMF) has been asked to examine the practicalities of such a tax and report back in April. But Dominique Strauss-Kahn, its managing director, warned that it could prove too easy to avoid for banks.

A tax of 1% or less levied on financial transactions would both raise considerable revenue and limit so-called speculative activity on extremely low-margin trades.

Brown also outlined other ideas that will be considered by the IMF. “There have been proposals for an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global transaction levy,” he said. “I do not in any way underestimate the enormous practical and technical issues ... but I do not think that these should prevent us from considering with urgency the legitimate issues.”

A Tobin tax — named after James Tobin, the economist — was floated by Lord Turner, head of the Financial Services Authority, in the summer. Alistair Darling, the chancellor, insisted Geithner’s opposition did not rule it out. “The US, like we do, recognises that there are various issues you have to deal with and that a lot of work is required,” he said.

Angela Knight, chief executive of the British Bankers’ Association, said that Tobin taxes “don’t work as they require perfect or near-perfect global implementation”. Vince Cable, Liberal Democrat Treasury spokesman, said experience suggested it would be hard to implement.

The G20 delegates agreed to work on a global growth strategy, with countries submitting individual plans in January for assessment by the IMF and Organisation for Econo-mic Co-operation and Development.

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