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."


Actress sees off speculation about her appearance in an amazing way

Arts and Entertainment
Serge Pizzorno of Kasabian and Noel Fielding backstage at the Teenage Cancer Trust concerts
musicKasabian and Noel Fielding attack 'boring' musicians
peopleLynda Bellingham's tragic final Loose Women appearance moves audience to tears
Arts and Entertainment
'Right Here' singer Jess Glynne is nominated for Best Newcomer at the MOBO Awards 2014
musicExclusive: Jess Glynne hits out at 'ridiculous' criticism of white artists nominated for Mobo Awards
Arts and Entertainment
The last great picture - Winner 'Black and White' and overall 'Wildlife Photographer of the Year'

Powerful images of strays taken moments before being put down

Arts and Entertainment
S Club 7 pose for Children in Need 2001
'Irritatingly Disneyfied': fashion vlogger Zoella

Arts and Entertainment
Separated at birth? Frank Sivero (left) claims The Simpsons based Mafia character Louie on his Goodfellas character
arts + entsFrank Sivero sues Simpsons studio over allegedly basing mobster character on Frank Carbone
Carl Bernstein (left) and Bob Woodward (right) with former 'Washington Post' executive editor Ben Bradlee

The Washington Post editor helped Bob Woodward and Carl Bernstein bring down President Nixon


Stephanie first after her public appearance as a woman at Rad Fest 2014

ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London