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George Osborne Set To Give Big Banks A Secret Tax Cut

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GEORGE OSBORNE
George Osborne leaves Downing Street before delivering his 2014 budget announcement at the House of Commons. | Matt Crossick/Matt Crossick

George Osborne slipped out a potential "secret tax cut" for Britain's biggest banks that could see them pay hundreds of millions less in tax, critics have warned.

Barclays and HSBC could be in line for a combined fall in their levy charges of more than £300 million under Treasury proposals to switch the bank levy to a band-based system which would see an individual bank's tax capped at an upper limit.

The move would suggest that the chancellor has heard the message from the City of London, which warned a few weeks ago that it was putting the competitiveness of London's financial sector at risk.

Labour’s shadow financial secretary Cathy Jamieson warned that the proposals would be a "secret tax cut" for major British banks.

“This looks like a secret tax cut for the big banks hidden in George Osborne’s Budget," she told the Telegraph.

"The bank levy has already raised billions less than was originally promised. George Osborne must come clean and explain what impact this banding will have on revenues from the bank levy in future years."

Osborne's proposed changes would come in after a consultation at the start of next year and put banks into five separate bands, with the levy rising from nothing to banks with balance sheets smaller than £20 billion to £375m for those with chargeable assets between £160bn and £320bn.

A Treasury spokesperson said: “The bank levy is forecast to raise £2.9bn a year from 2015-16 according to the independent OBR and the government has no plans to reduce the amount of money the levy raises.

“The consultation, announced at Budget last week, will look at ways to make the levy more predictable and sustainable moving forward.

“The suggested changes will not impact on the target yield from the levy, which is designed to ensure that the sector makes a fair contribution.”

The British Bankers' Association warned Osborne in a written submission: "The bank levy rate has been increased eight times since (it) was first announced at Budget 2010, and many of those increases have been implemented with minimal advance notice.

“The frequency of the rate change has not resulted in a stable tax environment for the banking industry and is inconsistent with the government’s desire for the UK to have a competitive, stable and predictable tax regime for business.”

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