Chancellor faces tough Budget call over tax on UK banks
Alistair Darling has little more than 48 hours to decide if he will announce a new tax on the UK's banks in Wednesday's Budget, after a weekend when the other political parties have tried to outflank the Chancellor by disclosing measures to keep the financial services industry in check.
By the time Mr Darling stands up to deliver his third Budget statement — one of Labour's |last set-piece opportunities to |persuade a wavering public to hand the party a fourth term in office — his opponents will have already outlined plans to tax the banking sector.
The Government has so far ruled out a specific tax on banks in the UK, preferring instead to work towards an international framework. However, this position was challenged on Saturday when David Cameron said the Tories would introduce a levy on the industry, if an international consensus failed to materialise.
One Government source said yesterday that the Budget text would be altered right up until the start of the speech, but that the introduction of a specific domestic bank tax was unlikely.
“The Chancellor is concerned about the competition impact of a unilateral banking tax. The view is that to act independently is not the best way forward.”
Pressure on the Government is growing, however. Mr Darling has few fiscal or monetary tools to attract voters, and any international deal is almost certain to come after the election. In interviews at the weekend, Mr Darling said there would be no “giveaways” this week.
A spokesman for the Conservatives yesterday refused to say how much the party expected to raise from its unilateral levy and Mr Cameron’s proposals were heavily criticised.
City minister Lord Myners attacked the speech by Mr Cameron on Saturday saying: “This ill thought-out Tory briefing has all the hallmarks of a plan made up on the hoof. This kind of tax on bankers needs to be international.”
The British Bankers' Association also criticised the proposal: “We believe any further reforms need to be timely, considered and internationally co-ordinated.”