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
ebooksA celebration of British elections
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Fans take a selfie with Ed Miliband in Kempston, near Bedford, on Tuesday
election 2015
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
  • Get to the point
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

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

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

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power