David Cameron to tax banks

Published on Saturday 20 March 2010 19:34

DAVID Cameron committed the Tories to imposing a new tax on banks yesterday as both main parties battled to convince voters they would claw back billions of pounds from the financial sector.

The Opposition leader said the US-style levy is needed to ensure taxpayers are repaid in full for the bail-out of financial institutions and protected from future collapses.

His pledge came amid renewed confidence of international backing for such a levy – although party sources indicated it would press ahead unilaterally with a more limited measure if not.

Chancellor Alistair Darling is expected to use this week's Budget to signal the government's support for a bank tax, although only as part of an international agreement. He is expected to set out detailed options in Wednesday's statement but will insist money raised should go into Treasury coffers and not be used for an insurance fund against future collapse.

There are fears the existence of an insurance fund could encourage risk-taking and that any unilateral action could prompt an exodus of banks from the City to less punitive regimes abroad.

The Conservatives have not given details of how their scheme would operate.

"We had the biggest bank bail-out in the world. We can't just carry on as if nothing happened," Cameron said. "In America, President Obama has said he will get taxpayers back every cent they put in. Why should it be any different here?

"So I can announce today that a Conservative government will introduce a new bank levy to pay back taxpayers for the support they gave and to protect them in the future. No, it won't be popular in every part of the City. But I believe it's fair and it's necessary."

Prime Minister Gordon Brown has been a leading advocate of some form of co-ordinated levy on the banks, which could bring in tens of billions of pounds a year from the financial services sector worldwide. He was forced to abandon his preferred option, a "Tobin" tax on transactions, but hopes the IMF will throw its weight behind a measure at its April meeting in Washington.