FSA chief supports tax to curb bonuses

| August 27, 2009

The chairman of the Financial Services Authority is supporting a new tax on banks, aimed at curbing the bonus culture in the City.

In an interview with Prospect magazine, Lord Turner attacked the industry and said some of the City’s activities had “swollen beyond its socially useful size” and was happy to consider taxing it.

Lord Turner comments: “If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit.

“Higher capital requirements against trading activities will be our most powerful tool to eliminate excessive activity and profits.

“And if increased capital requirements are insufficient I am happy to consider taxes on financial transactions - Tobin taxes,” he adds.

Tobin tax is the suggested tax on all trade of currency across borders and was named after the economist James Tobin in the 1970s.

However, Lord Turner’s proposals have been criticised by many. Tory MP John Redwood dismissed the proposals as “absurd”.

Furthermore, the British Bankers’ Association has expressed concerns that the wrong type of regulation could drive financial businesses abroad.

Bank bonuses have sparked public anger this year have been the subject of heavy criticism since it is banks that were blamed for the financial crisis.

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