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Bank levy a failure, says Labour party Bank levy a failure, says Labour party
(6 months later)
The Labour party has branded the government's bank levy a failure after releasing figures showing that over the past two years it has raised almost £2bn less than planned.The Labour party has branded the government's bank levy a failure after releasing figures showing that over the past two years it has raised almost £2bn less than planned.
Chris Leslie, Labour Treasury spokesman, said this amounted to a "tax cut of nearly £2bn for the banks" and reinforced the case for the tax on bank bonuses that Labour proposes.Chris Leslie, Labour Treasury spokesman, said this amounted to a "tax cut of nearly £2bn for the banks" and reinforced the case for the tax on bank bonuses that Labour proposes.
The Treasury did not contest the figures, but stressed that the rate at which the levy was charged was reviewed regularly.The Treasury did not contest the figures, but stressed that the rate at which the levy was charged was reviewed regularly.
Alastair Darling, the Labour chancellor, introduced a one-off tax on bank bonuses when he was in power that raised £3.5bn in 2010-11. The coalition government chose not to repeat it, but instead said it would raise about £2.5bn every year by introducing a permanent bank levy, a tax based on the annual value of debts held by the banks.Alastair Darling, the Labour chancellor, introduced a one-off tax on bank bonuses when he was in power that raised £3.5bn in 2010-11. The coalition government chose not to repeat it, but instead said it would raise about £2.5bn every year by introducing a permanent bank levy, a tax based on the annual value of debts held by the banks.
But, according to figures published by the Office for Budget Responsibility and HM Revenue and Customs, the levy has failed to raise this amount in both years it has been in force.But, according to figures published by the Office for Budget Responsibility and HM Revenue and Customs, the levy has failed to raise this amount in both years it has been in force.
In 2011-12 the Treasury raised £1.8bn from the levy. But the banks also gained £100m from the cut in corporation tax that was implemented that year, leaving a net gain of £1.7bn.In 2011-12 the Treasury raised £1.8bn from the levy. But the banks also gained £100m from the cut in corporation tax that was implemented that year, leaving a net gain of £1.7bn.
And, according to the Labour analysis, the levy raised just £1.6bn in 2012-13. This was offset by a £200m gain to the banking sector from another cut in the rate of corporation tax, leaving the exchequer with a net gain of £1.4bn. Labour says this means the levy has raised £3.1bn over two years, instead of £5bn as promised.And, according to the Labour analysis, the levy raised just £1.6bn in 2012-13. This was offset by a £200m gain to the banking sector from another cut in the rate of corporation tax, leaving the exchequer with a net gain of £1.4bn. Labour says this means the levy has raised £3.1bn over two years, instead of £5bn as promised.
Leslie, who is going to raise the figures when the Commons resume the debate on the finance bill this week, said: "On top of last week's tax cut for millionaires, this is effectively a tax cut of nearly £2bn for the banks at a time when millions of working people are being forced to pay the price for this government's economic failure.Leslie, who is going to raise the figures when the Commons resume the debate on the finance bill this week, said: "On top of last week's tax cut for millionaires, this is effectively a tax cut of nearly £2bn for the banks at a time when millions of working people are being forced to pay the price for this government's economic failure.
"Whether it's on tax or watering down reforms to separate retail and investment banks, David Cameron and George Osborne have repeatedly failed to stand up to the vested interests of the banks.""Whether it's on tax or watering down reforms to separate retail and investment banks, David Cameron and George Osborne have repeatedly failed to stand up to the vested interests of the banks."
Labour wants the bank levy to be supplemented with a tax on bank bonuses, which it believes could raise £2.5bn. It would use the money to fund its youth jobs guarantee.Labour wants the bank levy to be supplemented with a tax on bank bonuses, which it believes could raise £2.5bn. It would use the money to fund its youth jobs guarantee.
The Treasury said it had raised the bank levy to compensate for the fact that banks would gain from the chancellor's decision to cut corporation tax. A spokesperson said: "It is inevitable that the fragility of global financial markets will have had an effect on banks' balance sheets. This is why the government increased the bank levy both in December last year and at budget this year.The Treasury said it had raised the bank levy to compensate for the fact that banks would gain from the chancellor's decision to cut corporation tax. A spokesperson said: "It is inevitable that the fragility of global financial markets will have had an effect on banks' balance sheets. This is why the government increased the bank levy both in December last year and at budget this year.
"These increases offset the benefit to banks of the government's latest corporation tax cuts. We have said that we will review the bank levy this year to ensure it is operating efficiently.""These increases offset the benefit to banks of the government's latest corporation tax cuts. We have said that we will review the bank levy this year to ensure it is operating efficiently."
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