Government’s “puny” levy on banks under fire

Critics of the banking industry accused the government of going "soft" on the bankers

By New Statesman Published 10 December 2010

The government has unveiled the details of its £2.5bn banking levy, comprising a wide-ranging package of tax measures, but its detractors have already slammed the taxes, saying that they were "puny".

The tax will be levied on wholesale liabilities over £20bn. Up to 40 banks and building societies will be charged 0.05 per cent of their global balance sheets in its first year, slightly higher than the 0.04 per cent previously announced by the government. In 2012, the levy will be applied at the rate of 0.075 per cent rather than the 0.07 per cent proposed in the budget.

However, critics of the banking industry accused the government of going "soft" on the bankers and exhorted it to raise its target for the levy.
The bank levy has been designed to repair some of the damages caused by banks in the financial crisis, but tax campaigners pointed out that the £2.5bn bank levy could hardly be considered to be a "fair contribution", given that bank bosses will be getting around £7bn in the form of bonuses this year.

David Hillman, spokesman for the Robin Hood Tax campaign, pointed out that almost £1.2tn of taxpayers' money had been used to bail out the industry during the financial crisis.

"The banks can afford to pay an extra £2bn a year which could protect the poorest at home and abroad. The case is clear - the banks can pay more and the government must get serious about its commitment to fairness," he said.

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6 comments

Fri, 2010-12-10 22:58 — Eddy S (not verified)

The coalition have gone further on this than we did, alaistair darlings and gordon brown's position was always that we should get international agreement - i.e. in order that bank operations are not moved in order to minimise company taxation.

the ultimate goal should be to maxmise taxation - we currently tax 50% of bonuses - which pays a sizeable chunk of revenue to pay for our public services. if we lose some taxation because operations move to more favourable locations such as singapore, hong kong or zurich then who wins - other countries.

let's have a robin hood tax but let's impose it world-wide otherwise it'll be us who lose out. then every country in the world can take a chunk out of bank profits.

Sat, 2010-12-11 19:04 — matthew fox (not verified)

@ Eddy S

Are to tell me that an British Government, elected by the popular vote, cannot regulate banks without the say so of the other countries?

Isn't that the erosion of the British people? Do Canberra, Beijing, Sao Paulo, Wellington now have a veto on how we make laws or regulations?

Sat, 2010-12-11 19:06 — sunfield (not verified)

We won't lose a lot if they move their ops to singapore, hong kong or zurich. We probably now get somewhere around £40bn tax revenue from the whole of the financial sector and a high proportion of that is from stuff that couldn't move. In any case unless there's a rip-roaring boom in the near future the financial sector is due to decline everywhere anyway. We won't lose much. The sector is so tax efficient it's not worth that much to us.

Sun, 2010-12-12 18:05 — Eddy S (not verified)

@ matthee fox. you're correct, no one should dictate policy to us. but i'm sure alistair darling and gordon brown must have looked at issues analytically and so should the popular vote via informed debate. we definetly do need tighter regulation of this area, higher capital requirements etc.

personally i feel the UK finance industry has grown too strongly over the last debt-fuelled decade i.e. through the growth of cheap finance supported by global imbalances and the willingness of the chinese and other emerging economies to provide cheap finance to the west.

what we should do though is NOT waste the tax revenue from the finance sector for consumption today via government spending on services rather we should do as the clever chinese and other smart nations i.e. invest this money in a soverign wealth fund that would help finance growth industries, infrastructure and other strategic areas (there's no thought by any party in this area unfortunately). this would also help diversify our economy.

then one day when every country decides to tax bank profits individually we'll be afford to say - "you know what, we don't need to rely on the jobs and tax revenues from this sector as much as we did, because we have thought long-term - we've planned for the future and we're not stuffed - we put our money away in the strategic wealth fund".

in the meantime in terms of tax rates, it makes sense to look at our dependencies in terms of what we gain from this sector e.g. how many people are employed in this sector, how many in-direct jobs it supports and then look at the impact of future jobs growth moving to other global centres.

we should plan alternative growth areas and employment sectors today - of course non of this will ever happen we're far too short sighted for that.

Sun, 2010-12-12 18:37 — Dark Heart of Toryland (not verified)

In the '70s, the Unions were accused of holding the country to ransom, and the Conservatives considered responded with some of the most illiberal anti-union legislation in the western world. Now the finance sector is holding the country to ransom, and how do the Tories respond?