Campaigners accused the Government of "going soft" on banks as it unveiled details of its £2.5bn banking levy.
The proposed new tax, to be paid by up to 40 banks and building societies, will be 0.05 per cent of their global balance sheets in its first year. This is more than the initially proposed level of 0.04 per cent. In subsequent years it will be charged at 0.75 per cent, rather than the planned 0.7 per cent.
However, other aspects of the levy have been tweaked to make it easier on banks, which will also benefit from a steep cut in corporation tax planned by the Government. The number of liabilities that will be taxed have been cut while some – such as substantial deposits above the £50,000 guaranteed by the Financial Services Compensation Scheme, will be charged at half the rate.
Overall, the amount raised when the tax comes into full force is expected to remain at about £2.5bn. This has angered campaigners, who argue that it is not enough given the £1,000bn of taxpayers' money spent on propping up the sector.
David Hillman, a spokesman for the Robin Hood Tax campaign said: "The Treasury says the £2.5bn bank levy is a 'fair contribution'. Yet in the new year, when bankers will be paying themselves tens of billions of pounds in bonuses, the rise in VAT will be hitting the poorest hardest. That does not look like a 'fair contribution' to most people.
"Having received more than £1trillion in public bailout money, the banks can afford to pay an extra £2bn a year which could protect the poorest at home and abroad. The case is clear – the banks can pay more and the Government must get serious about its commitment to fairness."
The TUC general-secretary, Brendan Barber, agreed, saying: "With all eyes on the tuition fee vote, the Government's spin machine is trying to bury the unpopular news that they are going soft on an already puny bank levy. But while banks benefit from corporation tax cuts and go back to paying huge bonuses, the rest of us are facing cuts in vital services and a VAT hike – the most unfair tax of all. Yet ministers still have the cheek to say their policies are fair."
Banking shares also suggested that investors were pleased with the measure, reforms to which follow intense industry lobbying. Barclays finished up 11.85p at 276p last night, HSBC gained 7.8p to 66.7p, while RBS put on 1.33p to 42.31p and Lloyds Banking Group was up 0.63p to 68.28p.
But Angela Knight, the head of the British Bankers' Association, said that while the industry accepted the levy, "urgent action" was needed to ensure that Britain's banks did not get hit by the levies imposed by several countries, with the likes of France and Germany planning their own charges.
Ms Knight said: "The banks are committed to playing their part in restoring the UK economy – and that includes helping to meet the greater demands on the Exchequer. The bank levy rate has been revised to generate the £2.5bn of annual revenues that the Treasury originally estimated. However, we remain very concerned about the effect of the bank levy on the international competitiveness of the UK. We believe urgent steps are required to prevent the multiple charging of levies on multinational banks. Failure to act swiftly would further damage the reputation of the UK as a global financial centre."
Matthew Barling, a bank tax partner at PricewaterhouseCoopers, said: "The legislation has a number of other changes – it's good news that the amendments to the anti-avoidance provisions now mean ordinary commercial transactions should not be captured. The industry still needs clarity on exactly how the double tax relief will be delivered and how the UK levy will interact with those in other European territories."Reuse content