Bank levy raised to £2.5bn

8th Feb 2011 08:16

Chancellor George Osborne has increased the government levy on bank profits this year by £800m to £2.5bn.Originally the chancellor said he would phase the tax in, with a lower rate of £1.7bn applicable in 2011 rising to about £2.5bn annually by 2012-13.But today, the Treasury said it had increased the levy to raise the full amount in the first year as it wanted banks to make "a fair contribution" to the potential risks they pose to the financial system and to encourage them to move to less risky funding.The chancellor also said the move would also give some clarity ahead of the bank bonus announcement season. However, bosses of Britain's biggest four banks are 'livid' at the levy increase, according to a report on the BBC.The hike came ahead of Osborne's first joust with new shadow chancellor Ed Balls in the Commons today. Ahead of their clash, Balls said: "This panicky announcement seems to be a fig leaf to hide George Osborne's failure to get a deal on the Project Merlin talks with the banks."Project Merlin, a deal between the banks and government over bonuses and business lending commitments, called has stalled with the Treasury reportedly unhappy with the clarity of the data it is receiving.A report in the FT suggests the banks will provide over £1bn in equity funding to small companies to help boost regional growth as part of an imminent deal. Nick Clegg, deputy prime minister, is confident banks will provide £1.3bn over three years to invest in enterprises in parts of Britain most affected by the economic slump, the paper suggested.