Chancellor of the Exchequer Alistair Darling said the UK will force banks awarding bonuses above £25,000 ($40,800) to pay a one-off levy of 50 per cent.
“There are some banks who still believe their priority is to pay substantial bonuses to some already high-paid staff,” Darling said in Parliament today. “Their priority should be to rebuild their financial strength and to increase their lending.”
The move forms part of the Labour government’s efforts to assuage voter anger over bankers’ pay ahead of an election which has to be held by June. Darling is balancing the need to curb a record budget deficit while supporting voters struggling in the UK’s longest recession since 1955, and is seeking to recoup money from banks after they benefited from a government-backed bailout during the credit crisis.
“There is no bank that has not benefited either directly or indirectly from this help,” said Darling, who ruled out a tax on banks’ profits. “I’m giving them a choice. They can use their profits to build up their capital base, but if they insist on paying substantial rewards, I’m determined to claw money back for the taxpayer.”
The new levy, effective from today until April 5, will be charged to employers. It applies to all banks and building societies operating in the UK, including subsidiaries of foreign banks. The Treasury said it will raise about 500 million pounds from the tax, affecting about 20,000 bankers.
Bonuses for UK financial services employees may rise by 50 per cent to 6 billion pounds this year, the Centre for Economics & Business Research Ltd said in October. Barclays Plc President Robert Diamond yesterday said a tax on bankers’ bonuses risks putting the country at a competitive disadvantage.