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.”
Just 19% of people think banks are competently managed.
The big banks have been battling to get money out of the door to help British SMEs but are still struggling as business lending has fallen in most parts of Britain. An investigation by Lawrence Tomlinson, the business department's entrepreneurial adviser, found that government-owned banks were "crucifying" firms in the way they managed their financial support.
Banks are still paying out millions for mis-sold payment protection insurance. This has led to a peak in complaints too.
Over a dozen high street banks and credit card firms have agreed on a compensation fund of more than £1 billion for potentially for seven million people who had been mis-sold credit card and identity theft protection. It all stems from card insurance policies supplied by York-based CPP Group.
Did the Bank of England miss an attempt by traders to rig the gilt market too? Tory MP Andrea Leadsom thinks so. Financial regulators are investigating. Meanwhile one of the Bank officials said such an attempt at a dodgy trade would be "reprehensible" if proven.
Banker bonuses effectively increased by 4% over last year to £38.6 billion, after banks deferred bonuses to take advantage of George Osborne's 50p income tax rate coming in. Osborne's introduction of the lower 45p income tax band, announced in his Budget last year means that the taxpayer lost out on an estimated £85 million as banks deferred £700 million of bonuses to April this year. Also, we have three times more millionaire bankers than the rest of the EU combined.
Regulators are still looking into the Libor interbank fixing scandal, bringing charges against traders they have managed to single out.