Michel Barnier, the European Union commissioner with responsibility for financial affairs, has put himself on a collision course with the UK with new proposals for a levy on the banks to pay for insurance against future financial crises. Both Labour and the Conservatives have said the proceeds of any such charge on the banks should go into general taxation, rather than such insurance.
Mr Barnier called for each of the EU’s 27 member states to set up their own insurance fund, financed by a new tax on the banking sector. The funds could then be accessed by governments in the event of another financial crisis.
The EU’s proposals will be taken into consideration at next week’s meeting of the International Monetary Fund, which is to make recommendations on whether - and how - a new tax on the banks should be introduced. Plans for such a levy are expected to be finalised at a G20 summit in June.
The British government is opposed to the notion of an insurance fund. Alistair Darling, the Chancellor, said this month that he hoped the G20 would opt for a new levy on the banks, but insisted the money raised should be available to governments to use as they see fit.
Such revenue would be useful for countries, such as Britain, where the public finances are under pressure. But Mr Darling also opposes the idea of an insurance fund on the grounds that knowing such a scheme was in place might encourage banks and other financial institutions to go on taking inappropriate risks.
George Osborne, the Conservatives’ shadow chancellor, has said he would introduce a levy on the banks even if the G20 does not finally opt to go down this route. But Mr Osborne would also like to have the funds raised available to him and would therefore oppose Mr Barnier’s plans.Reuse content