Why Osborne might give ground on bank tax
Challenger banks claim they will be disproportionately hit by new profit surcharge
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.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
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.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Saint Paul de Vence: a paradise for art lovers
The Week Recommends The hilltop gem in the French Riviera where 20th century modernism flourished
By Alexandra Zagalsky Published
-
'People in general want workers to earn a decent living'
Instant Opinion Opinion, comment and editorials of the day
By Justin Klawans, The Week US Published
-
What might a Trump victory mean for the global economy?
Today's Big Question A second term in office for the 'America First' administration would send shockwaves far beyond the United States' shores
By Rafi Schwartz, The Week US Published
-
Labour shortages: the ‘most urgent problem’ facing the UK economy right now
Speed Read Britain is currently in the grip of an ‘employment crisis’
By The Week Staff Published
-
Will the energy war hurt Europe more than Russia?
Speed Read European Commission proposes a total ban on Russian oil
By The Week Staff Published
-
Will Elon Musk manage to take over Twitter?
Speed Read The world’s richest man has launched a hostile takeover bid worth $43bn
By The Week Staff Last updated
-
Shoppers urged not to buy into dodgy Black Friday deals
Speed Read Consumer watchdog says better prices can be had on most of the so-called bargain offers
By The Week Staff Published
-
Ryanair: readying for departure from London
Speed Read Plans to delist Ryanair from the London Stock Exchange could spell ‘another blow’ to the ‘dwindling’ London market
By The Week Staff Published
-
Out of fashion: Asos ‘curse’ has struck again
Speed Read Share price tumbles following the departure of CEO Nick Beighton
By The Week Staff Published
-
Universal Music’s blockbuster listing: don’t stop me now…
Speed Read Investors are betting heavily that the ‘boom in music streaming’, which has transformed Universal’s fortunes, ‘still has a long way to go’
By The Week Staff Published
-
EasyJet/Wizz: battle for air supremacy
Speed Read ‘Wizz’s cheeky takeover bid will have come as a blow to the corporate ego’
By The Week Staff Published