You might have thought George Osborne would be glad of European Union moves to introduce a financial transaction tax, saving him from having to grasp this nettle himself. Such a tax, often called a Robin Hood tax, would help to stabilise financial markets and reduce short-term speculation and the dangerous domination of the financial sector in Britain.

Instead, he instigated a legal challenge to block attempts by 11 countries to develop such a tax. Now that Europe's highest court has rejected this challenge, we should heave a sigh of relief, but instead we see predictable hand-wringing over the UK's loss of power. Ukip's Nigel Farage claims the decision shows that the government is impotent in protecting the country's biggest industry from the EU. The reality is that it is Brussels, not our own government, which in this instance is acting in the best interests of the British population.

At its best, the financial services sector provides important services to people across the income spectrum. But in its current guise, it is failing to do so. In fact, it has become a powerful driver of inequality. The huge increase in speculation in the financial markets has pushed the volume of financial transactions to more than 70 times the size of the world economy. And we are all still suffering from the irresponsibility of this sector, which led to the global financial crash.

Lord Turner, former chair of the Financial Services Authority, described much of the financial services sector as "socially useless" and said it had grown too big. Calculating the difference between what people take out of the economy in terms of their pay, and what they put in in terms of the value to society of their work, the New Economics Foundation estimated that many people in the financial services sector were a burden on the rest of us.

Public health experts have written to the prime minister to point out that higher food prices and austerity policies are threatening our health. As a result of the pressure on incomes, consumption of fresh fruit and vegetables has declined. The biggest declines have been among the least well-off and last year over 900,000 food parcels were handed out. According to the European commission's impact assessment, the 11-country financial transaction tax will generate in the region of €34bn a year. The Robin Hood tax campaign suggests that just £4bn would be enough to halve child poverty, while £5bn could insulate every home. The 11 EU countries fortunate enough to be proceeding with the tax, led by Germany, may press ahead as early as next week.

But this advance is not simply about a bloated financial sector and poverty. It is about tackling inequality and the damage it does to the whole society. Britain remains one of the most unequal of the rich developed countries and, as a result, it performs badly on a wide range of social indicators, from measures of social cohesion, child wellbeing and social mobility to the number of people in prison, teenage birth rates and mental illness.

According to the Equality Trust, the richest 100 people in Britain now own more than the poorest 30% of families. It estimates that if Britain were to reduce its income inequality to the average levels of inequality found in other rich countries, the reduction in health and social problems could be worth the equivalent of £39bn each year.

Much taxation is no longer progressive, but, as the International Monetary Fund has stated, a financial transaction tax would be very progressive. The Robin Hood tax is an appropriate name.