George Osborne said that the French and Germans have joined the UK in committing to introduce a bank balance sheet levy to ensure banks make a fair contribution to reflect the risks they pose. Once fully in place, it is expected the levy to generate over £2 billion of annual revenues.
The reforms will also mean a greater contribution from the banking sector, one that far outweighs any benefit they receive from the lower tax rates. In putting in order the nation’s finances, it should be remembered that this was a crisis that started in the banking sector. The failures of the banks imposed a huge cost on the rest of society.
Mr Osborne believes it is fair and it is right that in future banks should make a more appropriate contribution, which reflects the many risks they generate. Such an approach has already been recommended by the International Monetary Fund. The Government is exploring the costs and benefits of a Financial Activities Tax, on profits and remuneration, and working with international partners to secure agreement.
The British Government takes the initiative in this global debate about the appropriate risks and rewards in international banking.
It will apply to the balance sheets of UK banks and building societies, and to the UK operations of banks from abroad. A bank levy will be introduced from January 2011:
· There will be deductions for Tier one capital and insured retail deposits, and a lower rate for longer maturity funding.
· Smaller banks with liabilities below a certain level will not be liable for the levy.
· Once fully in place, it is expected the levy to generate over £2 billion of annual revenues.
· There are those who have argued that we should wait until every country in the G20 introduces a bank levy.
He said that the French and Germans have joined the UK in committing to introduce a bank balance sheet levy. In a joint statement,the three governments have pledged to ensure banks make a fair contribution to reflect the risks they pose.
© HM Treasury
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