Banks braced for yet another hike in levy

Tim Wallace
Follow Tim
SHRINKING balance sheets mean the bank levy will raise less money than hoped, pushing George Osborne to increase the level of the tax, analysts at Deloitte warned yesterday.

The charge is expected to raise around £1.8bn in 2012-13, below the £2.5bn target. The rate is being hiked to 0.13 per cent of equity and liabilities – but Deloitte warns that too will fail to hit its target.

“The OBR forecast a bank levy yield for 2013-14 of £2.8bn. We predict that the actual yield will be below that target, despite the increased levy rate,” said Wayne Weaver. “As banks continue to shrink their balance sheets and improve their funding profile, the bank levy cost reduces.”

As a result Osborne could raise the levy again, or expand it to cover small lenders as well as big banks.

Meanwhile banks face more pressure to increase lending.

Analysis from Policy Exchange shows lending to businesses has declined by £57bn since 2008, despite the cheap funds and incentives offered under the Funding for Lending Scheme.

The think-tank wants the Bank of England to relax banks’ capital requirements to free up resources for lending, and for the incoming ring-fence to be relaxed to reduce the costs imposed on lenders.