Government plans to raise £2.5bn with bank levy

Britain's banks will pay an extra £2.5 billion in tax a year by 2012 under draft legislation published today in a Government move to repair some of the damage caused by their role in the financial crisis.



The levy will apply charges to the global balance sheets of UK banks and the British operations of foreign firms, the Treasury said.



Unveiling the legislation, Mark Hoban MP, financial secretary to the Treasury, said the levy would not just raise money but "encourage less risky funding".



He said: "The scheme achieves two objectives: firstly, ensuring that banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy.



"Secondly, the final scheme design incentivises banks to make greater use of more stable financial sources, such as long-term debt and equity, working with the grain of our wider reform programme."



The levy will replace the Labour Government's one-off bonus tax introduced earlier this year, which charged 50% on all windfalls above £25,000 - raising over £2 billion.



The draft legislation said the Treasury would have the power to offer tax relief to those banks that faced double taxation, because they operate in other countries where the levy applies.



But the British Bankers' Association warned the levy would have a significant impact on the more than 200 overseas banks operating in the UK.



It said: "Questions are being raised about the UK proposing to apply tax to a global balance sheet.



"The Treasury's statement is largely silent on how this levy would interact with taxation in other countries. Until this is clearer, some banks could be taxed multiple times by multiple jurisdictions on the same activities.



"There is also no international consensus on how banking activities should be taxed - the G20 members still hold very different views."



Revealing his highly anticipated spending review yesterday, Chancellor George Osborne also confirmed all UK banks would be asked to sign up to a tax code of conduct by the end of next month.



So far, only four out of 15 banks have signed up to the code under which they agree not to design avoidance schemes to reduce their bills or those of their clients. Part-nationalised banks Royal Bank of Scotland and Lloyds are believed to be two of the banks to sign up.



There are fears the tough measures on the banking sector could lead to an exodus of players, with groups such as HSBC and Standard Chartered signalling potential willingness to quit the UK.



But Mr Osborne said banks should share the pain of measures to repair the deficit caused by the financial crisis and added that he and his coalition colleagues "neither want to let banks off their fair contribution, neither do we want to drive them abroad".



Initial details in the summer Budget showed the levy would be charged at a lower rate of 0.04% in the first year - generating an expected £1.15 billion - rising to 0.07% or £2.3 billion in 2012/13 and up to £2.5 billion in 2013/14, and the Treasury said these details were yet to be finalised.



The developments come as experts predict UK bank bonuses will reach around £7 billion this year after the sector's marked recovery since the credit crunch.



US players such as Goldman Sachs and JP Morgan Chase have already revealed bumper pay and salary pots earmarked for staff after a better-than-expected third quarter.



TUC general secretary Brendan Barber said: "This is a pathetically small amount to demand from the banks. Ministers have come up with the smallest number that they think they can get away with, even though the banks are carrying forward £19 billion of tax losses to offset against future tax bills - losses that have been bailed out by the taxpayer."

Arts & Entertainment
Ricky Gervais at a screening of 'Muppets Most Wanted' in London last month
tvAs the second series of his divisive sitcom 'Derek' hits screens, the comedian on why he'll never bow to critics who habitually circle his work
Arts & Entertainment
Don (John Hamm) and Megan (Jessica Paré) Draper are going their separate ways in the final series of ‘Mad Men’
tvReview: The suits are still sharp, but Don Draper has lost his edge
News
news
Life & Style
Going down: Google's ambition to build an elevator into space isn't likely to be fulfilled any time soon
techTechnology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
VIDEO
News
David Cameron sings a hymn during the enthronement service of The Most Rev Justin Welby as Archbishop of Canterbury, at Canterbury Cathedral last year
news
Life & Style
From long to Jong: Guy Pewsey outside Mo Nabbach’s M&M Hair Academy in west London before the haircut
fashionThe Independent heads to an Ealing hairdressers to try out the North Korean dictator's trademark do
Sport
Vito Mannone fails to keep out Samir Nasri's late strike
sportMan City 2 Sunderland 2: Keeper flaps at Nasri's late leveller, but Black Cat striker's two goals in 10 minutes had already done damage
Extras
indybest10 best smartphones
News
peopleRyan Gosling says yes, science says no. Take the A-list facial hair challenge
Arts & Entertainment
tvCreator Vince Gilligan sheds light on alternate endings
Life & Style
Google Doodle celebrates the 63rd anniversary of the Peak District National Park
tech
News
Paul Weller, aka the Modfather, performing at last year’s Isle of Wight Festival in Newport
people
Life & Style
Michael Acton Smith founded Firebox straight out of university before creating Moshi Monsters
techHe started out selling silliness with online retailer Firebox, before launching virtual creatures who took the real world by storm
News
Ethical matters: pupils during a philosophy lesson
educationTaunton School's policy of putting philosophy at heart of its curriculum is one of secrets of its success
Arts & Entertainment
Play It Forward: the DC Record Fair in Washington, US
musicIndependent music shops can offer a tempting alternative to downloads on Record Store Day
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Analyst - Financial services, Client data, LEI

£40000 - £50000 per annum + BONUS + BENEFITS: Harrington Starr: A leading, Cit...

Management Consultancy - Operational Research Analysts

£35000 - £50000 per annum + Bonus + Benefits: Pro-Recruitment Group: You must ...

Corporate Actions Consultant - Market data, ISO15022, presales

£45000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: Corporate Acti...

Prudential Risk/Operational Risk Associate - London

£350 - £400 per day: Harrington Starr: An opportunity has arisen at a FCA regu...

Day In a Page

Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics

Is sexual harassment a fact of gay life?

Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics
Moshi Monster creator Michael Acton Smith: The man behind a British success story

Moshi Monster creator Michael Acton Smith

Acton Smith launched a world of virtual creatures who took the real world by storm
Kim Jong-un's haircut: The Independent heads to Ealing to try out the dictator's do

Our journalist tries out Kim Jong-un's haircut

The North Korean embassy in London complained when M&M Hair Academy used Kim Jong-un's image in the window. Curious, Guy Pewsey heads to the hair salon and surrenders to the clippers
A History of the First World War in 100 moments: A forgotten naval victory in which even Nature played a part

A History of the First World War in 100 moments

A forgotten naval victory in which even Nature played a part
Vespa rides on with launch of Primavera: Iconic Italian scooter still revving up millions of sales

Vespa rides on with launch of the Primavera

The Vespa has been a style icon since the 1950s and the release this month of its latest model confirms it has lost little of its lustre
Record Store Day: Independent music shops can offer a tempting alternative to downloads

Record Store Day celebrates independent music shops

This Saturday sees a host of events around the country to champion the sellers of well-grooved wax
Taunton's policy of putting philosophy at heart of its curriculum is one of secrets of its success

Education: Secret of Taunton's success

Taunton School, in Somerset, is one of the country's leading independent schools, says Richard Garner
10 best smartphones

10 best smartphones

With a number of new smartphones on the market, we round up the best around, including some more established models
Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

The former Australia coach on why England must keep to Plan A, about his shock at their collapse Down Under, why he sent players home from India and the agonies of losing his job
Homelessness: Why is the supported lodgings lifeline under threat?

Why is the supported lodgings lifeline under threat?

Zubairi Sentongo swapped poverty in Uganda for homelessness in Britain. But a YMCA scheme connected him with a couple offering warmth and shelter
A History of the First World War in 100 Moments: When the world’s biggest shed took over Regent’s Park

A History of the First World War in 100 Moments

When the world’s biggest shed took over Regent’s Park
The pain of IVF

The pain of IVF

As an Italian woman vows to keep the babies from someone else’s eggs, Julian Baggini ponders how the reality of childbirth is often messier than the natural ideal