Well that didn't last long

On Saturday Gordon Brown told G20 finance ministers meeting in St Andrews that a tax was the best form of defence against a failed banking system. The other ministers, who saw that the problem was largely a result of failed regulation and the solution was no to give more money to the government (the cost of which would be passed on to customers, but better regulation.

The idea was attacked by the US, Canada, Russia, the International Monetary Fund and the European Central Bank, so the next day, Brown backed down. End of story.And so it should be, because the Tobin tax was not conceived as a form of insurance, but rather as a levy on currency transactions in 1971 in order to reduce the volume of speculative trading which was thought to increase currency price volatility.

A Tobin tax on banking transactions in general would only increase margins. Price volatility is not the issue, so the idea will not solve the problem.

Lord Turner thinks it will shrink the financial sector, but in reality it will only reduce the size of the finanicla sector by reducing the demand for products. Mr Brown on the other hand thinks it will help to build up funds to pay for future bail-outs, but sincec (a) he has never saved and revenue in recent years, (b) he doesn't know when the next bail-out will be required and thus how much revenue has been set aside and (c) he doesn't know how much will be required, the whole exercise looks like a non-starter. The better solution has always been to improve regulation.