City in uproar at plan for bonus 'supertax'
Treasury dismisses claims that new levy on payouts will drive bankers abroad
Alistair Darling will impose a one-off "supertax" on big bonuses paid to individual bankers but has ruled out a windfall tax on banks' profits.
The Chancellor will announce his plan to claw back excessive bonuses in his pre-Budget report tomorrow. His officials are still drawing up the scheme in the hope of stopping bankers finding a loophole such as incorporating bonuses into basic pay.
Options include a special higher rate of tax, in excess of the 50p top rate of tax on incomes above £150,000 taking effect next April. It would apply for one year only and to all banks, not only the Royal Bank of Scotland and Lloyds Banking Group in which the Government has a stake. Treasury advisers believe the supertax could deter some banks from paying huge bonuses. They denied the plan was a last-minute panic move prompted by public outrage over RBS's proposal to pay £1.5bn in bonuses to its investment division.
Mr Darling does not want to tax banks rather than bankers as that would hinder the Government's drive for them to rebuild their capital. He has also rejected a Tory plan to change the way bank losses are offset against tax.
The Chancellor will present his one-off raid on bankers' bonuses as part of a "fairness" agenda running through his PBR. Close allies dismissed charges of cheap populism, insisting that most people would regard it as unfair for people who were only in jobs because taxpayers' money saved the banks to walk away with large bonuses. They dismissed warnings that the best bankers would quit Britain or that the human rights of bankers might be infringed. "What about the human rights of the rest of us? Bankers are giving us a two-fingered salute," said one senior Treasury source.
But the clawback plan has already provoked a furious reaction in the City of London – it was dubbed "populist, punitive and penal" – and there were warnings that the City's position would be undermined.
Angela Knight, chief executive of the British Bankers' Association, said that a supertax on bonuses would send the wrong message to the world about the UK's position as a financial centre. "We have already seen quite a few companies shift out of the UK. It might be popular to put very high taxes on a few, but we need to know how we would look internationally," she added.
Ms Knight insisted: "The issue may well be one of human rights. In effect it says, if you earn a certain amount of money and work in something called a bank then you are likely to be taxed more than if you earn the same amount of money doing the same kind of activity in an organisation called an insurer."
Stuart Fraser, head of policy at the City of London Corporation, said the crackdown would be unworkable. "It's a bit like the transfer market in football," he said. "The talent will simply go."
Lord Myners, the City minister, attacked the RBS board over suggestions that it might resign en masse in the stand-off over bonuses.
He told peers: "The board of directors of RBS has apparently threatened to resign if they don't get the bonuses that they want, but I think that's rather a silly line for them to adopt and actually a very unpatriotic one and I think the nation finds that act indeed shameful."
Labour MPs and activists are urging the Chancellor to act against the bankers. Gavin Hayes, general secretary of the centre-left pressure group Compass, said: "We're glad the Government is now considering the sensible option of a windfall tax on bonuses – this is the right thing to do and proceeds should go to a green New Deal to create the new jobs we desperately need. Over the next few days it is crucial the Government does not cave into the City spin machine – let's have a pre-Budget report for the people, not the bankers."
- 1 Which country would be hardest to invade?
- 2 The man who filmed the Freddie Gray video has been arrested at gunpoint
- 3 Floyd Mayweather vs Manny Pacquiao live: Mayweather puts on defensive masterclass to win by unanimous decision
- 4 Floyd Mayweather's mouthguard costs $25,000 - enough to fly to Las Vegas and back 18 times
- 5 Royal baby girl born: Duchess of Cambridge's second child will be a princess thanks to Queen
Which country would be hardest to invade?
Morgan Freeman on the riot-focused coverage of the Baltimore protests: 'F**k the media'
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
The man who filmed the Freddie Gray video has been arrested at gunpoint
Nepal earthquake: Many survivors receiving no help despite relief effort
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
Indonesia executions live: 'Hysterical' families heard prisoners being shot dead by firing squad
General Election 2015: SNP and its activists 'openly racist' towards the English, Farage says
EU exit would hit UK economy much harder than neighbouring countries, study finds
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
iJobs Money & Business
£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...
£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...
£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...
£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...