Fear in the City as bank levy published
By Ian Dunt
City institutions were watching warily today as the Treasury published details of a permanent bank levy, designed to discourage excessive risk-taking.
The levy, which is expected to raise £2.5 billion in annual revenues by 2012/13, is currently only in draft form, but final legislation will appear before the end of the year.
It had originally only been planned for one year but George Osborne confirmed that it would be made permanent during the spending review announcement yesterday.
Financial secretary to the Treasury Mark Hoban said: “We have consulted on the design of the scheme so that it achieves two objectives: firstly, ensuring that banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy.
“Secondly, the final scheme design incentivises banks to make greater use of more stable financial sources, such as long term debt and equity, working with the grain of our wider reform programme.”
The levy design is based on International Monetary Fund (IMF) proposals delivered to the G20.
TUV general secretary Brendan Barber suggested bankers would laugh it off.
“This is a pathetically small amount to demand from the banks. Ministers have come up with the smallest number that they think they can get away with,” he said.
“Those who caused the recession will be cracking open the champagne today, while the full extent of the attacks on the living standards of poor and middle income Britain are starting to sink in.”
The levy forms just part of the government’s plans for the banks. The Independent Commission on Banking is still looking at ways to reform the banking system and promote competition, including potentially separating banks’ investment functions from their retail functions.
The government is also still investigating a financial activities tax on profits and remuneration, although it is wary of going ahead without an international consensus.
