By Max Clarke
The Chancellor has announced today an increase in the rate of the bank levy to be charged in 2011. This change will increase the revenue from the levy in 2011 by £800m to £2.5 billion.
The Government initially announced that a reduced rate of 0.05 per cent would apply in 2011, recognising the uncertain market conditions prevailing at the time. The Government no longer considers this necessary. Therefore, from 1 March the rate of the levy will be 0.1 per cent for 2 months, to offset the lower rate of 0.05 per cent charged in January and February, before moving to 0.075 per cent.
The Bank of England recently noted that the near-term outlook and resilience of the UK banking sector has improved (Financial Stability Report, Bank of England, 17 December 2010). Markets also now have certainty over the timing and direction of regulatory change, with the Basel III regulatory reforms not being introduced until 2013 at the earliest and including extended transition periods.
This increase in the rate of the levy will mean that it raises £2.5 billion in 2011, the same as the target revenue for future years. Previously the 2011 yield was forecast to be £1.7 billion.
As a result of this increase in the rate of the levy, the forecast revenue raised from the levy has been revised for 2011.
Commenting on today's announcement, the General Secretary of Britain's public sector union Dave Prentis said:
“It is only right that the bankers pay their fair share towards getting the country out of the crisis they caused. But in Britain’s multi-trillion pound banking industry, £800 million is small fry. And, compared to the billions in bonuses already handed out this year, and others set to be announced next week, this is a drop in the ocean.
“It’s time the government used its power as major shareholders of some of Britain’s biggest banks to take real action. A Robin Hood Tax on the banks could raise more than £30 billion — money which could be spent on safeguarding jobs and recovery.”