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As part of its election manifesto, the Green Party says it would introduce a "Robin Hood tax" on transactions involving shares, bonds and financial contracts called derivatives.

Traders would pay a fee each time a transaction takes place.

The party said it would replace the existing stamp duty on deals involving shares. A transaction tax could raise £20bn a year for the Exchequer and help stabilise markets, the Green Party said.

The idea of taxing financial transactions is not new. Sweden introduced a similar tax in the mid-1980s but subsequently abandoned the measure after many trading companies left the country. The European Commission tried to introduce a transaction tax in 2011 but failed in the face of opposition from several EU countries, including the UK. A smaller group of member states - including Germany, France, Spain and Italy - is trying to take the project forward among themselves but have not yet reached an agreement.

A transaction tax could raise considerable amounts of money and some say it has the potential to make financial markets less volatile because, for example, it might deter high-volume, short-term, speculative trading. It's also been argued the City should pay more following its role in the financial crisis.

Opponents say that the tax could threaten London's success as a financial hub, as companies would relocate elsewhere to avoid higher charges. And there are fears that any additional costs to financial companies would be passed onto consumers. There is also a view that any financial benefits would be dwarfed by the costs of a weaker economy that could result.

When the measure was put forward at an EU level, the UK was part of a vanguard of countries to defeat the motion. Britain even took the European Commission to court to challenge the legality of such a tax, although it was unsuccessful.

We have yet to see any detail about the Greens' proposed measure. While there are precedents that could help policymakers looking to develop a transaction tax, a UK government seeking to do so would face strong resistance.

What's the truth behind the politicians' claims on the campaign trail? Our experts investigate the facts, and wider stories, behind the soundbites.

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