Darling stakes his claim to proceeds of levy on banks

Chancellor backs calls for tax on banking assets but rejects insurance fund

The proceeds of a new tax on banking assets, which could raiseup to £5bn a year, should be available to national governments to use as they see fit, Alistair Darling insisted yesterday.

In a letter to fellow finance ministers in the G20 group of industrialised nations, which is trying to agree an international approach to such a levy, the Chancellor warned that if the proceeds from the tax were paid into some sort of global fund, there was a danger the banking industry would see it as an "insurance policy to benefit individual institutions, shareholders or creditors".

"To minimise moral hazard, the proceeds of a levy should go into general taxation rather than a stand-alone fund," Mr Darling added.

"While internationally co-ordinated, the proceeds of any levy should be for national governments to use." The Chancellor's letter comes amid growing consensus that the banking industry should contribute in some way towards the implicit benefit it gets from the fact that governments have stood behind the largest institutions.

G20 members are moving towards backing a levy on banks' assets, though disagreements remain about the size and structure of such a charge, as well as on how the money might be used.

Some members believe the levy should underpin an insurance scheme that could be tapped into in the event of future financial crises, an approach that Mr Darling effectively ruled out yesterday.

While the Chancellor rejected the idea on grounds of "moral hazard", his critics will note that, were the levy to be introduced along the lines the US has suggested, at around 0.15 per cent of bank balance sheets, the UK would raise £4bn to £5bn in tax revenues, a useful windfall for the public finances.

The French and German governments yesterday issued a joint statement giving their support for an international bank levy, though both countries appear to favour putting the money aside to finance future bailouts of the financial system.

The Germans are already working on laws to introduce their own version of a levy, while Christine Lagarde, the French Finance minister, said yesterday that both countries agreed "fundamentally on the international measure this mechanism should take".

Ms Lagarde said the G20 had not ruled out an alternative approach to a levy on banks, opting for a tax on banking transactions, rather than balance sheets. Such a move has the support of an international coalition of charities, which believe this sort of tax could raise billions of pounds for aid and other good causes. However, the US, Canada and several other countries have already objected to such an approach.

The International Monetary Fund is due to meet later this month to make recommendations on its view of how a bank levy should work before the G20 discusses the tax at a summit in June.

The bank tax: Where the parties stand

Labour's position, as expressed by the Chancellor, is that a new levy on the banking sector is necessary, but that the tax must be introduced by the G20 as a whole, rather than unilaterally.

David Cameron has said he will introduce a new tax on the banks even if no such levy is introduced internationally. The proceeds would be used to repay State support for the banking sector.

Vince Cable, the Liberal Democrat Treasury spokesman, proposes a 10 per cent levy on banks' profits to compensate taxpayers for underwriting the bailout of the financial system.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
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

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn