Q.WHICH BANKS WILL BE HIT BY THE LEVY?
A.The revised levy will apply to UK banks on all equities and liabilities after a £20bn allowance is reached. It applies the same rules to the UK operations of foreign banks.
HOW MATERIAL IS TODAY’S CHANGE?
Initially, the rate that banks pay will be increased to 0.1 per cent for short-term chargeable liabilities and 0.05 per cent for long-term chargeable equity and liabilities, to offset the lower top rate of 0.05 per cent and 0.025 per cent respectively that was charged in January and February. After 30 April, this will drop back down to 0.075 per cent for short-term chargeable liabilities and 0.0375 per cent for long-term chargeable equity and liabilities. According to early analyst estimates the total levy could cost HSBC £500-600m, Barclays, Lloyds and RBS about £400m, and Standard Chartered about £100m.
HOW DOES THIS DIFFER FROM LABOUR’S ONE-OFF BONUS TAX?
Labour’s bonus tax, which ran from December 2009 to April 2010, applied a 50 per cent levy to all bank bonuses over £20,000. The coalition’s follow-up levy, which kicked in at the start of January this year, shifts the charge to the bank’s whole balance sheet and was initially set at 0.05 per cent. Labour says its tax brought in £3.5bn, but the coalition claims the actual figure was £2.3bn, once a reduction in income tax and corporation tax receipts was taken into account.
The Treasury says that according to a December report on financial stability by the Bank of England the “near-term outlook and resilience of the UK banking sector has improved”. This, it says, means that banks are more able to afford the incremental increase, and the government has modified its plan to delay the full impact of the levy until next year. Labour will be keen to claim victory though, after leader Ed Miliband argued in mid-January that the government was effectively handing banks a tax cut by applying a lower rate, making the amount raised less than Labour’s one-off bonus.