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.

Travel
travel
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Jamie and Emily Pharro discovering their friend's prank
video
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Manchester United are believed to have made a £15m bid for Marcos Rojo
sportWinger Nani returns to Lisbon for a season-long loan as part of deal
News
news
News
i100
Arts and Entertainment
O'Toole as Cornelius Gallus in ‘Katherine of Alexandria’
filmSadly though, the Lawrence of Arabia star is not around to lend his own critique
Life and Style
fashion
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

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Senior Project Manager

£60000 - £90000 per annum + Bonus: Harrington Starr: Global leading Energy Tra...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Oil & Energy Business Anaylst

£45000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Harrington Sta...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment