David Prosser: Welcome windfalls from the City

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The Independent Online

Budget Outlook As admissions of failure go, the Chancellor's revelation that the bank bonus tax has raised £2bn will not have felt too painful. But it was a failure nonetheless. This was a tax designed to deter banks from paying staff large bonuses – "their priority should be to rebuild their financial strength and increase their lending", Mr Darling said in December – and it has not done so. The tax has raised almost four times as much as the £550m it was expected to deliver.

Still, the bonus tax take underlines the point the Chancellor himself made yesterday. For all the very worthy talk of rebalancing Britain's economy, of reducing its dependence on the financial services sector, this is an industry that we must continue to nurture, whatever our feelings about the greed and irresponsibility of certain bankers.

That should begin with securing a decent deal for the hedge funds and private equity firms based in London, as negotiations continue over the European Commission's alternative investment funds directive.

Then there is the question of how to design the levy on the banks that Mr Darling supports. The Chancellor is right to insist we implement such a levy across the G20 rather than taking unilateral action. But this will almost certainly mean the tax is on assets rather than transactions, which will raise less money than those campaigning for a "Robin Hood" duty had hoped.

Like the bonus tax, this will also be a levy introduced in the name of moderating banks' behaviour, rather than generating a windfall. A worthy aim no doubt. But as Mr Darling has discovered, it is also awfully convenient when the side effect of such a policy is to produce a pile of cash that can be channelled into good causes.

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