Bank profits tax to be permanent

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George Osborne is making the levy on bank profits permanent

Chancellor George Osborne has announced that he was making the levy on bank profits permanent, raising an extra £800 million this year and £2.5 billion every year.

He said he wanted to make sure “banks make a fair contribution to closing the deficit”.

But Mr Osborne, speaking on the BBC Radio 4 Today programme, conceded he had not yet struck a deal on limiting bankers’ bonuses – saying he hoped that making the tax position plain would aid the prospects of a deal.

Mr Osborne denied his move was politically motivated, saying: “No, it’s economics and the need to make sure the banks make a fair contribution to closing the budget deficit.

“The measure we have just announced means there’s an extra £800 million coming in to the Treasury this year. What I have announced is a permanent tax on banks, every year banks contributing £2.5 billion net.”

He continued: “I’m still confident we can secure a deal with the banks on seeing an increase in lending to small businesses and see that bonuses are lower this year than last year.”

The Chancellor said he was originally going to phase the levy in, but banks were in a healthier position than had been thought.

“We can move more quickly to the full rate and that’s exactly what I have just announced,” he said.

The Chancellor continued: “The banks themselves understand they need to make a fair contribution to the economic recovery. The rate (of the levy) was going up at the beginning of March and I also wanted on the table what we are going to do on tax” before continuing further talks with banks.”

Asked about people’s anger over bankers’ bonuses, Mr Osborne replied: “I totally understand that anger and I share some of their frustration. It would have been better if, when we were bailing the banks out, we had secured something from the banks in return. Unfortunately I was not Chancellor at the time.”

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