Money & Banking

Britain hikes bank levy by £800 million

Vidya Ram London | Updated on March 12, 2018 Published on February 08, 2011

The British government has added an additional £800 million to the levy on banks' profits this year.

The Chancellor, Mr George Osborne, made the announcement on Tuesday, ahead of next month's Budget, which will take the total levy to £2.5 billion for the year.

The government had originally planned to phase-in the profits tax over time to the maximum of £2.5 billion , but Mr Osborne said as the banking sector had performed stronger than expected this year, he wanted to ensure they paid their fair share. The government is currently in negotiations with the banks over Project Merlin, a joint deal to cap remuneration, and increase lending to small businesses, which stalled late last year.

Mr Osborne said that he had announced the levy increase ahead of those talks to ensure the negotiations would continue in good faith.

If the government had been hoping for union approval it will be disappointed: the announcement has so far received little but criticism. Mr Len McCluskey, the general secretary of the country's second largest union, Unite, described the increase as a “pittance.”

“The effort to present this bank levy as a punishment for the banks is pathetic,” he said on Tuesday. Meanwhile, Mr Ed Balls, the new Labour spokesperson on Treasury matters, accused the government of giving the banks an effective tax cut. “If George Osborne was serious he would adopt Labour's plan to repeat last year's £3.5 billion-bank bonus tax on top of the bank levy.”

Less attractive

The British Bankers Association warned that “constant chopping and changing risks making the UK a less attractive place for businesses to operate.”

While the government has controlling stakes in two of the country's largest banks – Royal Bank of Scotland and Lloyds Banking Group – banks such as Barclays, Standard Chartered and HSBC survived the financial crisis without resorting to state aid, and have been critical of the stricter regulatory regime introduced.

Earlier this month, the HSBC Chairman, Mr Douglas Flint, said that the bank levy would be a factor going into the bank's triennial review of its headquarters. “We are finding institutional investors routinely now in meetings asking us to explain the cost of being in the UK and the benefits,” told a Parliamentary committee.

Published on February 08, 2011

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