Osborne set to confirm plan for bank levy

GEORGE Osborne will confirm plans to introduce a banking levy when he delivers his inaugural Mansion House Speech tonight.

The chancellor will tell banks he is prepared to impose a tax on the industry even if other countries refuse to follow suit.

Although he is not expected to flesh out the full details of the levy before an emergency Budget on 22 June, his Liberal Democrat coalition partners are urging him to raise far more than originally planned.

When Osborne first unveiled the levy, aides said it would raise just over £1bn. But business secretary Vince Cable is known to want to raise a considerably higher sum, probably somewhere between £2bn and £3bn.

The Lib Dems think the government needs to take a more aggressive stance against the banking industry if it is to sell the biggest public spending cuts in a generation to the public.

Osborne will tell his audience that banks must pay for their role in causing the financial crisis, especially as the country gears up for spending cuts.

Meanwhile, the chancellor is expected to use the speech to unveil his reforms of the tripartite regulatory system. The Financial Services Authority (FSA) will lose the vast majority of its powers in the biggest shake-up of regulation since 1997.

Most of those powers will go to the Bank of England, which will take full responsibility for macro-prudential regulation. Governor Mervyn King is also expected to be tasked with spotting future housing bubbles.

And a new body charged with fighting economic crime will be created alongside a new protection agency for consumers.

If the FSA does survive, it will be a shadow of its former self, with few functions other than managing day-to-day relationships with banks and other financial services companies.