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."

Sport
Brazilian fans watch the match for third place between Brazil and Netherlands
world cup 2014Brazil 0 Netherlands 3: Dutch pile on the misery in third place playoff
Sport
Robin van Persie hands his third-place medal to a supporter
Van Persie gives bronze medal to eccentric fan moments after being handed it by Blatter
News
Ian Thorpe had Rio 2016 in his sights
people
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

PROMOTED VIDEO
News
scienceScientists have developed a material so dark you can't see it...
News
Monkey business: Serkis is the king of the non-human character performance
peopleFirst Gollum, then King Kong - now the actor is swinging through trees in Dawn of the Planet of the Apes
Arts and Entertainment
Blackman: Landscape of children’s literature does not reflect the cultural diversity of young people
booksMalorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Voices
Mrs Brown's Boy: D'Movie has been a huge commercial success
voicesWhen it comes to national stereotyping, the Irish know it can pay to play up to outsiders' expectations, says DJ Taylor
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Life and Style
Once a month, waistline watcher Suran steps into a 3D body scanner that maps his body shape and records measurements with pinpoint accuracy
techFrom heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
News
Soft power: Matthew Barzun
peopleThe US Ambassador to London, Matthew Barzun, holds 'jeans and beer' gigs at his official residence. He says it's all part of the job
Sport
Joe Root and James Anderson celebrate their record-beaking partnership
cricketEngland's last-wicket stand against India rewrites the history books
News
Gavin Maxwell in Sandaig with one of his pet otters
peopleWas the otter man the wildlife champion he appeared to be?
News
Rowsell says: 'Wearing wigs is a way of looking normal. I pick a style and colour and stick to it because I don't want to keep wearing different styles'
peopleThe World Champion cyclist Joanna Rowsell on breaking her collarbone, shattering her teeth - and dealing with alopecia
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

How Saudi Arabia helped Isis take over northern Iraq

A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

The evolution of Andy Serkis

First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

You thought 'Benefits Street' was controversial...

Follow-up documentary 'Immigrant Street' has got locals worried
Refugee children from Central America let down by Washington's high ideals

Refugee children let down by Washington's high ideals

Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
Children's books are too white, says Laureate

Children's books are too white, says Laureate

Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Blackest is the new black: Scientists have developed a material so dark that you can't see it...

Blackest is the new black

Scientists have developed a material so dark that you can't see it...
Matthew Barzun: America's diplomatic dude

Matthew Barzun: America's diplomatic dude

The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

Meet the 'Quantified Selfers'

From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

Five-star reviews are just the opening act for British theatre's first non-white artistic director

Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
Mrs Brown and her boys: are they having a laugh?

Mrs Brown and her boys: are they having a laugh?

When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

Otter man Gavin Maxwell's bitter legacy

The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

Joanna Rowsell: 'I wear my wig to look normal'

The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

Bill Granger's quick and delicious marinades

Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
Germany vs Argentina World Cup 2014 preview: Why Brazilians don't love their neighbours Argentina any more

Anyone but Argentina – why Brazilians don’t love their neighbours any more

The hosts will be supporting Germany in today's World Cup final, reports Alex Bellos
The Open 2014: Time again to ask that major question - can Lee Westwood win at last?

The Open 2014

Time again to ask that major question - can Lee Westwood win at last?