Britain's banks urge govt to phase out industry levy

London

BRITAIN'S banks have called upon the government to phase out the bank levy, saying that it is damaging the competitiveness of the industry and causing them to lose business to overseas rivals.

The levy was initially introduced in 2011 not only to raise money but also to discourage banks from risky borrowing, replacing a previous one-off tax on bankers' bonuses by the Labour government following the 2007-9 financial crisis.

Its emphasis has changed to focus on generating revenue with Britain's finance minister George Osborne saying in March that banks needed to make a greater contribution to repair the country's finances.

Mr Osborne increased the levy in March to 0.21 per cent of a bank's assets from 0.16 per cent previously. That lifted the amount the government aims to raise from the tax to £3.4 billion (S$7.14 billion) a year from £2.5 billion.

Anthony Browne, chief executive of the British Bankers Association, said in a letter to Mr Osborne on June 23 that the government should consider ways of reforming the tax. They "could include the levy to be capped in terms of its rate and a sunset clause introduced so banks can begin to plan for a future without the levy," he said. The Chancellor will outline his economic plans in an emergency budget on Wednesday following May's general election. The Treasury would not comment on whether he will address the issue of the levy, which was a pledge in the Conservative party's election manifesto.

"The levy is already causing damage," Mr Browne said in his letter to Mr Osborne. "For example, activities are being booked outside London and marginal investment decisions are seeing activity placed outside the UK." REUTERS