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UK Brown Calls On G20 To Mull Global Financial Transaction Levy

ST ANDREWS, Scotland -(Dow Jones)- The Group of 20 leading economies should consider applying a global financial transactions tax to pay for the cost of future banking crises, Prime Minister Gordon Brown said Saturday.

Brown said G20 members should discuss whether they need some kind of " insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global financial transactions levy."

In the past, the U.K. has leaned against the idea of a Tobin tax, which would use the proceeds of a financial transactions tax to provide funds to developing nations.

However, Brown's proposal more closely resembles a deposit insurance scheme, in that the fees gathered from the levy would be placed in a ring-fenced fund that would be drawn on should banks once again need state support to survive.

Brown said there needs to be a "better social contract" between banks and the rest of society.

"It cannot be acceptable that the benefits of success are reaped by the few, while the costs of failure are borne by all of us," Brown told finance ministers and central bank heads from the G20. "We need to consider if we need to go further in terms of mitigating costs to the rest of society."

Brown said Britain would not adopt such a plan "unless others move with us together."

He also said the tax would have to be "non-distortinary to avoid damaging reductions in liquidity, inefficient allocation of capital and the temptation of avoidance."

He also said any tax must not undermine efforts to stabilize the financial system and that the contribution from the financial sector must be "fair" and " measured."

-By Laurence Norman and Joe Parkinson, Dow Jones Newswires; 44-207-842-9270; laurence.norman@dowjones.com

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