Bank bosses react angrily to bonus payments windfall tax
Monday, 07 December 2009 10:15
Bank bosses have reacted angrily to a proposed windfall tax that could be announced by the chancellor later this week during his pre-budget report.
It was reported yesterday that the Treasury is considering a one year windfall tax on banker's bonuses.
But Angela Knight chief executive of the British Bankers' Association (BBA) called the proposal "populist, political and penal".
She said a windfall tax on bonuses would send the wrong message to the rest of the world about the UK's position as a banking centre.
"We have already seen quite a few companies shift out of the UK," she told the BBC.
"It might be popular to put very high taxes on a few but we need to know how we would look internationally."
Alistair Darling is reported to be considering options which include a super-tax on big bonus earners or a larger employers' National Insurance charge on banks.
The potential policy announcement follows a spat between the government and the board of Royal Bank Scotland (RBS) which threatened to quit if the government attempted to thwart its plan to pay £1.5bn in bonuses to investment banking staff.
The board claimed last week that if it were unable to make the payments the staff would leave the bank and work for one of its competitors. It claimed the government, which owns a 73% stake in RBS, was attempting to bully it into not paying the bonuses.
Yesterday Mr Darling told the BBC's Andrew Marr show the government had a "veto" over bonuses at RBS but said the bank had "not come to us with any proposals at all at the moment because they don't yet know what the end of year position will be".
But he added bonuses would have to be reasonable and responsible.
He added: "We are not going to be held to ransom by people who believe you can pay extraordinarily high bonuses without regard to what's going on."
Liberal Democrat Shadow Chancellor, Vince Cable accused both Labour and the Conservatives lacking clarity in their approaches to the banking industry.
He added: "The simple and correct approach, since many banks are returning to high levels of profitability, is for banks to pay for the taxpayer guarantee that they currently enjoy.
"A 10% levy on bank profits would raise around £2bn in current conditions and would go to paying down the deficit.
"This is a much more effective solution than a one off levy and recognises the debt that the banks owe to the taxpayer."
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