A tax on FX (and possibly other) financial transactions is spectacularly bad. Generally all new taxes are bad, as at least the winners and losers from the old taxes have their gains and losses capitalised and stable. This article from the TPA is the most comprehensive demolition job I've come across, but generally every serious article that has been written about it has concluded that it is a unusually bonkers idea.
I know that Milton Friedman made some comment about the fact that he'd never seen a tax cut that he didn't like, and that reducing taxes had the effect of 'starving the beast' (of big government). I don't think that even he would have argued for a government that didn't raise tax for defence and the administration and enforcement of the law. My personal view is that most transfer payments (which, strictly speaking, are not government spending at all) are justified, and these are going to be a big part of spending for a long time to come.
We already have a tax on transactions: stamp duty. This is a disastrous tax, which John Major, when he was chancellor, promised to abolish. So much for promises made by politicians - from the Right or the Left. Sadly, I notice that some Tories are in favour of the tax. Once upon a time the Conservative Party wanted a smaller state.
