City bonuses facing round two of taxes

DOWNING STREET has confirmed the government is considering a second bank levy on pay and profits, after new figures estimated the bonus payout for the City would be around £7bn this year.

Any new levy will take the form of a Financial Activities Tax (FAT), which would be imposed on remuneration and profits.

David Cameron will use his conference speech today to promise to “sort out the banks”, who he says are not doing enough to boost the economic recovery.

“Taxpayers bailed you out – now it’s time for you to repay the favour and start lending to Britain’s small businesses again,” he will say.

“This is basically a slap in the face for banks. They will not get away with it,” said a source close to the Prime Minister.

The government is stepping up its threats after the Centre for Economics and Business Research (CEBR) said the total bonus payout in the City would fall to £6.9bn this year, compared to £7.3bn in the 2009-10 financial year.

However, the taxman will take home more of the bonus than the person who earned it, as the new tax rate of 50 per cent on income over £150,000 comes into force.

Earlier this week, the Treasury indicated it would be willing to introduce a FAT for banks and large building societies, as long as a handful of other nations, such as France and Germany, follow suit.

Chancellor George Osborne is planning to discuss the FAT with other finance ministers at international meetings like the G20 to gauge support.

Even if nations like Hong Kong, which is fast-becoming a major international banking centre, refuse to sign up to the FAT, the government is prepared to press ahead with the plans.