Emergency Budget: Osborne imposes levy on the banks

By Tobias Benedetto

Chancellor George Osborne has announced a levy on UK banks and building societies that will raise more than £2 billion a year.

He also announced that there will be a levy on the UK operations of foreign banks.

The banking sector desperately tried to limit any move to tax their liabilities or assets in the run-up to the Budget.

But the chancellor will be hoping that anger at the bank levy will be counter-balanced in the City by a cut in the rate of corporation tax and relief on national insurance contributions for firms outside London and the south-east.

The measures, to be implemented from April 2011, will not affect smaller banks.

During the election campaign the Conservatives proposed a flat levy on banks’ assets – a modest percentage charged on the size of the loan books.

The Liberal Democrats were more radical, calling for a ten per cent increase on the tax charged on banks’ profits.