New | Britain’s banks call on London to phase out industry levy

Britain’s banks have called upon the government to phase out the bank levy, saying 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 banks needed to make a greater contribution to repair the country’s finances.

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 pounds (US$5.3 billion) a year from 2.5 billion.

Anthony Browne, chief executive of the British Bankers Association, said in a letter to Osborne on June 23 that the government should consider ways of reforming the tax.

"Proposals to consider could include the levy to be capped in terms of its rate and a sunset clause introduced so that banks can begin to plan for a future without the levy," he said.