Osborne raises bank levy to £2.5bn

The Government is to increase the bank levy, raising an extra £800m.

The government is to increase the bank levy to £2.5bn, raising an extra £800m.

Such a change would usually be set out in the Budget, which is only a month away.

However, Chancellor George Osborne announced that it was being brought forward so banks knew the context they were operating in before announcing their bonus payments in the next few weeks.

Osborne also said that he felt the banks were in better shape than he thought they were two months ago and were now strong enough to pay the extra £800m.

The coalition says the levy on bank balance sheets is a better way of making sure companies make a fair contribution to tackling the deficit than extending Labour's bank bonus tax.

The Financial Times reported that the coalition was confident banks would provide £1.3bn over three years to parts of the UK hardest hit by spending cuts, on top of the £1.5bn Business Growth Fund which the banks announced in the autumn.

Bank bosses argue that lending targets for what might be weaker businesses could breach rules that say any decision should be in the best interest of shareholders.

Speaking on the BBC Radio 4's Today programme, Mr Osborne said: "What really matters is if we get a measurable and significant increase in lending to small and medium-sized businesses.

"That's what people will want to look at when we conclude a deal, if we conclude a deal."

Osborne has not yet struck a deal on limiting bankers' bonuses and increasing loans to businesses but said he hoped that making the tax position plain would aid the prospects of an agreement.

Next week banks will begin to announce the value of their bonuses.

Total bonus payouts are expected to top £6bn - almost eight times the additional tax being raised.

The chancellor said that he "understood" people's anger over bonuses:

"It would have been better if, when we were bailing the banks out, we had secured something from the banks in return. Unfortunately I was not chancellor at the time."

6 comments

UK Citizen's picture

Bank levy what pish, what the media isnt reporting about the how the government is slashing corporate tax invalidating any levy. We lose vital services while the rich have tax breaks, & we're all in this together?

pls read! http://www.guardian.co.uk/commentisfree/2011/feb/07/tax-city-heist-of-ce...

ang's picture

hhtp://www.youtube.com/watch?v=yy14xHBO98c
33 secs of sheer joy. Miliband taking the piss out of Cameron.

David Vinter's picture

Tax the banks more---and up will go bank charges, wait and see!

Worried Tube User's picture

And the politicians find another 2.5Bn reasons for the UK financial services industry to relocated to some place with regulation by sanity rather than "sound byte" vote grubbing on live media broadvast.

If you want to know why you can't find a job in the UK, look no further than all the Fin Serv and IT support roles being advertised in Zurich and Geneva

Alex, London's picture

How much is he handing back to them though?

While all this fuss is going on about the Big Society, The Bank Levy and Project Merlin a real coup d'etat is going on under the radar with the Finance Bill 2011, called by Monbiot "the heist of the century". Read a layman's explanation of it here and PLEASE spread the word:

One Sausage Too Many – stealing from the poor and giving to the rich

http://sturdyblog.wordpress.com/

matthew fox's picture

I think the need for a State Bank, like the Bank of North Dakota would be a good idea.

It wouldn't be a magic bullet, but a least a catalyst to better economic growth.

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