International agreement on a banking tax, designed to safeguard against excessive risk-taking in the financial services sector, is getting closer, the Prime Minister said yesterday.
Any consensus on what Gordon Brown describes as a "global responsibility levy" is not likely to be reached before June's gathering of the G20 in Toronto, however – a month after the general election he is the favourite to lose. Having argued that the financial crisis was caused by a faltering global financial system, the Government has made an international deal the keystone of its banking regulation policy.
Mr Brown's comments come after talks last week with the German Chancellor, Angela Merkel. "Britain, France and Germany have talked about what we do together. We are agreed on the need for a common basis," the Prime Minister said.
Canada, which will host the G20 meeting in June, is also thought to be doubtful that an agreement can be reached before November's G20 gathering, which will be held in Seoul.
The Conservatives are also behind an international agreement, and, like the Government, argue that a unilateral tax would damage the UK's competitiveness. However, last month David Cameron said he would impose a so-called "stability fee" unilaterally if a global deal could not be reached. The Liberal Democrats say that they would impose a 10 per cent tax on banks' profits immediately.
Despite Mr Brown's comments, there are still a number of proposals under consideration on how to tax the banks. The US is thought to favour a charge on wholesale funding, while others would prefer a transaction tax on the deals done by the banks.
There is also disagreement on what to do with the proceeds of a levy. Mrs Merkel is pressing for the revenue to be used to create an insurance fund to be used instead of a state bailout if banks get into difficulties.
Mr Brown has indicated that governments should be able to use the proceeds of any tax in different ways, and thinks that an insurance fund might encourage the banks to return to risky practices, in the knowledge that they could be rescued again.Reuse content