OR City figures yesterday warned that Tory leader David Cameron’s proposals to raise over £1bn from a levy on the banks would prove to be a further drag on the competitiveness of the City on the global stage.
The Conservatives, who are due to outline the bank tax in their party manifesto tomorrow, plan to impose the levy on wholesale funding, delivering another kick in the teeth for investment banks.
The tax will be designed to raise over £1bn and will go ahead regardless of the level of international co-ordination, though the take could rise significantly if other countries follow suit.
Of the proceeds, £550m is set to go towards funding tax breaks for married couples and civil partners, a cornerstone of the Conservative election campaign. The remainder will be poured into Treasury coffers to help reduce the UK’s ballooning budget deficit.
Tory sources insisted the tax will not be material enough to damage the competitiveness of the City as a financial centre, arguing that Labour’s tax on bonuses – which is expected to raise £1.3bn – has failed to spark the talent exodus predicted by many business leaders.
But financiers expressed scepticism over Conservative efforts to soothe concerns over the fortunes of the UK banking sector.
“The fact is that this is yet another levy on the banking system,” said Simon Raggett, chief executive of corporate finance advisory firm Strand Hanson. “Regardless of which party implements which tax, there remains a question mark over the cumulative effect these policies will have on the competitiveness of the City. In isolation a small hike here and another raise there may not be huge, but it all adds up.”
Cameron’s tax proposals mimic the levy on wholesale bank funding that has already been introduced in Sweden. US President Barack Obama has outlined proposals for banks to pay a “financial crisis responsibility fee” on wholesale funding, while France and Germany have also pledged their support for a bank tax.