UK banks push for end to bank levy
Print Edition
BRITAIN’S banks have called on the government to phase out the bank levy, saying it is damaging the competitiveness of the industry and causing them to lose business to overseas rivals.
The levy was initially introduced in 2011 not only to raise money but also to discourage banks from risky borrowing, replacing a previous one-off tax on bankers’ bonuses by the Labour government following the 2007-9 financial crisis.
Its emphasis has changed to focus on generating revenue with Britain’s finance minister George Osborne saying in March banks needed to make a greater contribution to repair the country’s finances.
Osborne increased the levy in March to 0.21 percent of a bank’s assets from 0.16 percent previously. That lifted the amount the government aims to raise from the tax to 3.4 billion pounds (US$5.3 billion) a year from 2.5 billion pounds.
Anthony Browne, chief executive of the British Bankers Association, said in a letter to Osborne on June 23 that the government should consider ways of reforming the tax.
“Proposals to consider could include the levy to be capped in terms of its rate and a sunset clause introduced so that banks can begin to plan for a future without the levy,” he said.
Osborne will outline his economic plans in an emergency budget tomorrow following May’s general election. The Treasury would not comment on whether he will address the issue of the levy, which was a pledge in the Conservative party’s election manifesto.
Europe’s biggest bank HSBC has said the levy will be a factor in whether it decides to keep its headquarters in the UK. It plans to make a decision this year.
“The levy is already causing damage,” Browne said in his letter to Osborne. “For example, activities are being booked outside London and marginal investment decisions are seeing activity placed outside the UK.”
Browne said banks wanted more certainty around the issue and assurance that banks were part of broader plans to make sure the UK remained competitive on taxation.
Osborne said he hoped for a “new settlement” for the industry.
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