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Chancellor increases bank levy rate for 2011

printer Mail

George Osborne has announced an increase in the rate of the bank levy for 2011, having decided that the reduced rate set to recognise ‘uncertain market conditions’ is no longer necessary.

‘When I made the announcement [of a reduced rate for 2011] in June the world thought the banks were weaker than they’ve turned out to be, so we can move more quickly to the full rate,’ the Chancellor told the BBC before the markets opened this morning.

‘Many would say that [Osborne] is being motivated in part by the politics of being seen to be extracting more money from banks just as they’re about to announce controversial bonuses for their top people of perhaps £6 billion in total,’ the BBC's business editor Robert Peston wrote on his blog.

The rate was initially set at 0.05% for 2011 and 0.075% for 2012, with an exemption for the first £20 billion of chargeable equity and liabilities. The change will increase the revenue from the levy in 2011 by £800 million to £2.5 billion, the Treasury said.

‘The Bank of England recently noted that the near-term outlook and resilience of the UK banking sector has improved. 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,’ it added.

The levy is not yet on the statute book. Consultation on draft Finance Bill clauses, published on 9 December, closes tomorrow.