TORIES MULL TAX ON BAILED-OUT BANKS
A TORY government would consider a “windfall” tax on UK banks that have received state support, in an apparent sign of shadow chancellor George Osborne’s willingness to play hardball with the City.
One possibility for the tax, currently being discussed at the highest levels within the party, would take the shape of a new accounting rule banning state-backed banks from writing off old losses against tax.
It is not clear whether the rule would apply just to Royal Bank of Scotland and Lloyds Banking Group – both of which are part-owned by the taxpayer – or whether it would apply to all UK lenders, which have received implicit support via the banking bailout.
A major accounting firm contacted by City PM yesterday said plans of this nature were definitely “on the agenda” and that Labour was pondering something similar.
Senior economic advisers to Osborne are understood to believe that banks would not threaten to leave the country if the plans became reality, because London’s position as a leading financial centre is too important to their business models.
The proposal – revealed in today’s issue of the Spectator magazine – will be accompanied by measures to try and prevent banks from attempting to channel international losses through their London offices in an effort to reduce their payments to HM Revenue & Customs.
A law banning that practice could net the Treasury billions as the next government fights to erode the £175bn deficit.
The policy did not form part of Osborne’s speech at the Tory conference, which saw him unveil plans to tackle Britain’s debt with £23bn of spending cuts.
He outlined proposals including a public sector pay freeze in 2011, as well as a freeze on the salaries of MPs, repeating the mantra “We are all in this together” several times.
In a separate interview, he said he would fight with international ratings agencies to maintain the UK’s AAA credit rating and also suggested that the cuts he has already laid out could still be ramped up by tens of billions of pounds.
And the shadow chancellor dropped another hint at a bank windfall tax, saying that he might take action on banks via the tax system.
Tory MPs are also refusing to rule out a rise in VAT to 20 per cent, a move which it is estimated could raise as much as £13bn to help plug the deficit.