Page last updated at 14:15 GMT, Saturday, 20 March 2010

Tory leader David Cameron details plan for bank tax

David Cameron: "I believe it is fair and it is necessary"

Tory leader David Cameron has announced plans for a new tax on banks - even if other countries decide not to do so.

Mr Cameron has dropped his condition that he would only introduce such a tax if other countries did.

In a speech in London, he said the levy was "necessary" and the banks were one of the "vested interests" he was determined to confront.

Labour favours such a tax but only with international agreement. Lib Dems say banks must pay for taxpayer protection.

The Tories, who have not yet provided any details of how their scheme would operate, hope that by adopting a more limited measure if the UK acts alone they will avoid driving banks into exile.

Speaking in Putney, south-west London, Mr Cameron said: "We had the biggest bank bail-out in the world. We can't just carry on as if nothing happened.

ROBERT PESTON
BBC business editor Robert peston
The Tories and the government are less far apart on the imposition of a new tax on banks than may appear at first glance

"In America, President Obama has said he will get taxpayers back every cent they put in. Why should it be any different here?"

He said a Conservative government would introduce a new bank levy to pay back taxpayers for the support they gave and to protect them in the future.

Mr Cameron said it "won't be popular in every part of the City", but he believed such a levy was "fair" and "necessary".

In his speech, the Tory leader said his party has "the leadership, the energy, the strength of character to stand up to vested interests and make change happen".

According to Mr Cameron, a Tory government would be "strong, resolute, taking on those who block progress so we see change through".

'Systemic risk'

Chancellor Alistair Darling is expected to use next week's Budget to signal the government's support for a global bank tax, although only as part of an international agreement.

According to the Financial Times on Saturday, Mr Darling is to give his support to plans for a global tax on investment banks and institutions that pose a "systemic risk".

Under the plan, money raised should go into Treasury coffers and not be used for an insurance fund against future collapse, the newspaper said.

Treasury Minister Lord Myners said: "This kind of tax on bankers needs to be international.

"As the chancellor has made clear, the UK-only bank tax the Tories want is a sure fire way of encouraging a banking exit from the UK - raising costs to borrowers, damaging Britain's competitiveness and costing tens of thousands of jobs across the country."

He said the government was "at the forefront of international negotiations, tightening regulation and levering money out for small and medium sized enterprises", adding: "We have a plan to get our money back and we will: by selling the banks we own at the right time and the right price."

Liberal Democrat economics spokesman Vince Cable said: "The other parties seem to be moving on to ground the Liberal Democrats have occupied for some time: banks must pay for the protection they enjoy from the taxpayer."

Mr Cable said his party had been "very specific about how this crucial issue should be tackled, after extensive discussion with the City and others".

He said it was "seriously worrying that both the Conservatives and the government still do not seem to have worked out a specific proposal".

BBC business editor Robert Peston said: "With the last Budget of this Parliament only a few days away, it was inevitable that the Tories and the government would trade blows on whether and how to levy a new tax on the banks."

He added that it was "a big shift for Alistair Darling to say that he favours a tax on some measure of the risks being taken by banks, as opposed to introducing an insurance premium on them to meet the costs of future bail-outs".

Treasury sources say Mr Darling favours a tax over an untouchable insurance premium because he fears that banks could feel they were insured against the consequences of their actions and take even greater risks.



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