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Banks criticise windfall tax plan Banks criticise windfall tax plan
(10 minutes later)
British banking chiefs have reacted angrily to news the Treasury is drawing up plans for a one-year windfall tax on bonuses paid to some UK-based bankers.British banking chiefs have reacted angrily to news the Treasury is drawing up plans for a one-year windfall tax on bonuses paid to some UK-based bankers.
A scheme could be unveiled in Alistair Darling's pre-Budget report this week.A scheme could be unveiled in Alistair Darling's pre-Budget report this week.
BBC business editor Robert Peston said taxing bankers rather than banks would not weaken the banks and could raise several hundred million pounds.BBC business editor Robert Peston said taxing bankers rather than banks would not weaken the banks and could raise several hundred million pounds.
The British Bankers' Association chair, Angela Knight, called such taxes "populist, political and penal". Angela Knight from the British Bankers' Association (BBA) called such taxes "populist, political and penal".
International positionInternational position
She said such windfall taxes on bonuses would send the wrong message to the rest of the world about the UK's position as a banking centre.She said such windfall taxes 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. "We have already seen quite a few companies shift out of the UK," BBA chief executive Angela Knight told the BBC.
"It might be popular to put very high taxes on a few [bankers], but we need to know how we would look internationally.""It might be popular to put very high taxes on a few [bankers], but we need to know how we would look internationally."
She said that one million jobs in the UK were supported by the banking industry.She said that one million jobs in the UK were supported by the banking industry.
'Serious damage''Serious damage'
Options in Mr Darling's pre-Budget report on Wednesday may include a super-tax on big bonus earners or a larger employers' National Insurance charge on banks.Options in Mr Darling's pre-Budget report on Wednesday may include a super-tax on big bonus earners or a larger employers' National Insurance charge on banks.
Writing in his blog, Mr Peston said: "The advantage of taxing these bonuses are first that they are likely to be pretty popular with more-or-less everyone apart from the bankers, if opinion polls are to be believed.Writing in his blog, Mr Peston said: "The advantage of taxing these bonuses are first that they are likely to be pretty popular with more-or-less everyone apart from the bankers, if opinion polls are to be believed.
"But also, taxing bankers rather than banks would not weaken the banks themselves, at a time when they need to accumulate capital.""But also, taxing bankers rather than banks would not weaken the banks themselves, at a time when they need to accumulate capital."
It would not be great for the economic prospects of the UK if wealth-creating bankers and financial institutions emigrated to rival financial centres Robert Peston, BBC business editor Peston: A bonus super tax Send us your commentsIt would not be great for the economic prospects of the UK if wealth-creating bankers and financial institutions emigrated to rival financial centres Robert Peston, BBC business editor Peston: A bonus super tax Send us your comments
State-owned Royal Bank Scotland reportedly wants to pay a total of £1.5bn in bonuses to investment banking staff, and the board has threatened to quit if the government blocks the move.State-owned Royal Bank Scotland reportedly wants to pay a total of £1.5bn in bonuses to investment banking staff, and the board has threatened to quit if the government blocks the move.
Speaking on BBC One's Andrew Marr Show earlier, Mr Darling played down speculation about a windfall tax.Speaking on BBC One's Andrew Marr Show earlier, Mr Darling played down speculation about a windfall tax.
He said 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".He said 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 stressed: "These bonuses have to be reasonable and they have to be responsible and I think everyone has to accept that."But he stressed: "These bonuses have to be reasonable and they have to be responsible and I think everyone has to accept that."
'Gifted vast profits''Gifted vast profits'
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."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."
City commentator David Buik says the windfall tax plans sound "insane"City commentator David Buik says the windfall tax plans sound "insane"
But he acknowledged also that there had to be "sufficient incentives" to ensure RBS got back onto a "proper footing" and off the government's books.But he acknowledged also that there had to be "sufficient incentives" to ensure RBS got back onto a "proper footing" and off the government's books.
Mr Peston said if a windfall tax was imposed it would raise "considerably more than £1bn a year" and would not just apply to UK banks such as Barclays, HSBC and Royal Bank of Scotland, but also to the British arms of overseas firms, such as Goldman Sachs, JP Morgan and Deutsche Bank.Mr Peston said if a windfall tax was imposed it would raise "considerably more than £1bn a year" and would not just apply to UK banks such as Barclays, HSBC and Royal Bank of Scotland, but also to the British arms of overseas firms, such as Goldman Sachs, JP Morgan and Deutsche Bank.
"The fact is that we have gifted vast profits to the banks as a result of our actions," Peston quotes one minister as saying."The fact is that we have gifted vast profits to the banks as a result of our actions," Peston quotes one minister as saying.
"If they were using those profits simply to strengthen themselves that would be okay. But what we can't accept, and what society can't accept, is that they are using those profits to pay enormous bonuses"."If they were using those profits simply to strengthen themselves that would be okay. But what we can't accept, and what society can't accept, is that they are using those profits to pay enormous bonuses".
When the banks start making profits again they should start paying taxes again Shadow chancellor George Osborne Darling warns banks over bonuses Analysis: Manifesto clues?When the banks start making profits again they should start paying taxes again Shadow chancellor George Osborne Darling warns banks over bonuses Analysis: Manifesto clues?
Our correspondent also said taxing the bankers may not be cost-free for the UK.Our correspondent also said taxing the bankers may not be cost-free for the UK.
"It would not be great for the economic prospects of the UK if wealth-creating bankers and financial institutions emigrated to rival financial centres - for fear that the UK is becoming irredeemably hostile to them," he said."It would not be great for the economic prospects of the UK if wealth-creating bankers and financial institutions emigrated to rival financial centres - for fear that the UK is becoming irredeemably hostile to them," he said.
In the longer term, the prime minister and chancellor want a permanent levy on bank transactions, a so-called Tobin tax.In the longer term, the prime minister and chancellor want a permanent levy on bank transactions, a so-called Tobin tax.
Shadow chancellor George Osborne, for the Conservatives, said he "wouldn't rule out" a windfall tax on bonuses, but would prefer reforms to ensure banks pay tax on future profits.Shadow chancellor George Osborne, for the Conservatives, said he "wouldn't rule out" a windfall tax on bonuses, but would prefer reforms to ensure banks pay tax on future profits.
Liberal Democrat Treasury spokesman Vince Cable told the BBC "a special tax on the banks' profits" should last as long as the "banks continue to depend on taxpayer guarantees".Liberal Democrat Treasury spokesman Vince Cable told the BBC "a special tax on the banks' profits" should last as long as the "banks continue to depend on taxpayer guarantees".