City firms in fresh attacks on bonus tax

STEPHEN Hester, chief executive of Royal Bank of Scotland, warned yesterday that the politicisation of bankers’ bonuses could wipe billions of pounds off the taxpayer’s stake in RBS.

Treasury plans to levy a one-off 50 per cent tax on bank bonuses have added to woes at the Scottish institution, whose directors were already at loggerheads with the government.

Speaking after an investor meeting in Edinburgh, Hester said: “The process of politicisation of RBS is damaging to our business and is damaging to the taxpayer.”

His comments came as Treasury sources indicated to City A.M. that they intended to extend the scope of its bonus tax to include banks that pay their staff later in the year.

Some banks, such as NM Rothschild, were set to avoid the tax because they have traditionally paid their bonuses in June, after the one-off levy is due to end.

But the Chancellor Alistair Darling is expected to extend the tax so all banks are liable, regardless of when they pay their bonuses for the year.

Meanwhile, another City firm said it was considering leaving London. West Hill, the boutique investment bank specialising in insurance set up by former HSBC corporate financier Andrew Galloway, is thinking of relocating to Valais in Switzerland.

Galloway told City A.M.: “They have some attractive tax breaks there. We are generating some reasonable revenues and we don’t want to give them all away to the Inland Revenue.”

As the furore over the bank bonus tax and the increase in the tax band to 50p for higher earners continues, KPMG’s John Griffith-Jones added his voice to those who fear for the City’s future.

Griffith-Jones, who was a member of Bob Wigley’s committee that looked into the prospects for London as a financial centre in the future, described the bank’s bonus tax as “a cheap shot”.

“Portraying the tax as us and them may damage the reputation and fabric of the City,” he said, as KPMG announced its annual results.