So-called 'challenger' banks seeking to break the dominance of the big high street brands could yet win concessions over a controversial new tax announced in the summer Budget, which they claim will disproportionately hit smaller lenders.
The Guardian reports that Labour MP John Mann, who sits on the influential Treasury Select Committee, has tabled an amendment to the new rules excluding any bank with less than £25bn in assets from the new charge. This will effectively cover all new entrants, including the likes of Metro Bank, TSB and One Savings Bank, as well as most building societies.
The move comes days as the Financial Times reports chief executives of many of these smaller lenders will meet George Osborne to outline their concerns. They say they will be hit hard by a tax levied at eight per cent of any UK profits above £25m, while banks with international operations such as HSBC are expected to save hundreds of millions compared to the bank levy it replaces, which applied to all assets.
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But given that the plan was predicted to raise around £6bn at a time when the public finances are stretched, is the Chancellor likely to listen? Well, he just might.
The Treasury has been trying to make life easier for new banking entrants in order to increase competition in a sector that has been held back by past wrongdoing. It has already eased the process of obtaining a banking licence and offered concessions on capital reserves for new lenders. If it can be convinced that the tax would undermine these efforts, it may act.
It is also likely to be swayed by arguments about the impact on lending to smaller businesses – another key policy driver. Challenger banks say the reduction in profits would have the effect of reducing lending by as much as £6bn.
Finally, the tax may actually raise much more than originally thought, which would give Osborne wiggle room to limit its scope. The FT cites a range of estimates from banks and accountants such as Ernst and Young, which reckon it will actually bring in around £12bn, double the original "conservative" estimate.
