Cable calls for 10% levy on bank profits

By Emmeline Saunders

Liberal Democrat shadow chancellor Vince Cable has criticised high-risk “casino banking” and called for a ten per cent levy on bank profits this year to tackle the national deficit.

The money raised by the banking sector would create £2 billion revenue to help plug the debt it in part created, Mr Cable argued.

The Bank of England estimates that UK banks have received the equivalent of £1 trillion in support, with taxpayers acting as a ‘safety net’. Until the banks can be successfully broken up, the Lib Dems say the financial institutions should pay for the explicit guarantee they receive.

Mr Cable said: “One trillion pounds worth of taxpayer support has gone into keeping the British banking industry afloat.

“We must find a way to split the banks so that the British public no longer props up ‘casino’ banking.

“Meanwhile, it is only right for the taxpayer to get a fair deal for the guarantee that they provide to the banking industry.”

He said the government should use the Pre-Budget Report, out December 9th, to put forward this proposal so banks recognise the taxpayers’ contribution.

The Lib Dems have also called for a transparent system in which all bank staff earning more than £200,000 a year would have their bonuses published in their company’s annual report.

This, in addition to the levy, would reduce the size of bonus pools and force banks to pay out smaller bonuses.

Under Lib Dem plans, the ten per cent levy would be supplementary to corporation tax, except it would be payable on all profits made within the tax year without the deduction of previous years’ losses.

The party believes £4 billion could have been raised every year had this levy been in place before the financial crisis struck.

All UK banks would pay the levy under the Lib Dems, but building societies would be exempt as some already struggle to meet the high payments exacted by the Financial Services Compensation Scheme (FSCS).

The independent scheme acts as an ‘insurance kitty’ to help customers of insolvent banks.

The party’s ultimate aim is to split the banks, and when this happens the levy would be scrapped.