Shadow chancellor Ed Balls has proposed a bank levy hike in order to raise an extra £800m per year. That money would be put towards funding free childcare.
What Balls fails to tackle is the impact that ever higher levies will have on our financial services. Higher bank levies threaten to see the outlook for London as a home of international banking threatened.
Hitting banks with higher rates provides no free lunch. When the levy was last hiked in December, Ernst & Young warned that the hike threatened the health of the economy.
Chris Price, Ernst & Young:
If a bank is growing its balance sheet to try to quickly increase the supply of credit it can offer UK businesses, a blanket increase to the bank levy will actually penalise them.
The UK has moved to a declining corporate tax rate on the UK profits of UK headquartered groups and yet the bank levy is going in the opposite direction, with an increasing rate continuing to be applied to global balance sheets held in the UK.