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Friday 11th of February 2011
February 8, 2011    

Government will maintain levy on bank profits

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by Kay Murchie

Chancellor George Osborne has confirmed he is maintaining the levy on banks, raising an additional £800 million this year and £2.5 billion in the coming years.

In a radio interview, he said he wants to ensure “banks make a fair contribution to closing the deficit”.

Initially, Mr Osborne said the Government’s new bank levy would be introduced in stages, with a lower rate applicable in 2011, however, banks are in a better position that originally thought.

“We can move more quickly to the full rate and that’s exactly what I have just announced,” he said.

However, an agreement with banks to boost loans to small businesses and to limit bonus payments has yet to be reached - something which the Government has been criticised for.

However, the Chancellor said by clarifying the tax position, this should increase the chances of reaching a deal over lending targets and restraints on pay.

Commenting on the levy, he said: “The measure we have just announced means there’s an extra £800m coming in to the Treasury this year.

“What I have announced is a permanent tax on banks, every year banks contributing £2.5bn net,” he added.

The announcement comes shortly after the Sunday Times reported Britain’s top banks will pay out a combined £6 billion in bonuses.

Bonuses have been a major issue for some time now and have sparked public outrage since many argued that excessive bankers’ bonuses reward the risk-taking culture that led to the financial crisis.

Mr Osborne said he “understands” the anger and “shares some of the frustration.“

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