Balls criticises 'damp squib' plan to raise bank levy

In his first appearance at Commons question time as shadow chancellor, Ed Balls has dismissed George Osborne's plan to raise the levy on banks as a "damp squib".

On 8 February 2011, the former Labour leadership contender predicted that the government would fail to reach a wider agreement with the banks on bonuses and business lending, and claimed that the higher levy was designed to deflect attention away from this failure.

Announcing the change on BBC Radio 4's Today programme earlier, Mr Osborne estimated it would raise an additional £800m.

Mr Balls told MPs that it was unprecedented for a chancellor to unveil a tax rise in this way, describing it as a "hurried mini-Budget".

"This panicky announcement seems to be a fig leaf to hide George Osborne's failure to get a deal on the Project Merlin talks with the banks," he said.

But Mr Osborne said the move was part of a "credible plan", which would help "deal with the budget deficit, which he simply refuses to deal with because he is a deficit denier".

He added: "We are clear that we need to put in place steps to deal with the budget deficit, to ensure the banks lend more... that the banks pay less bonuses than they were paying when the party opposite was in government.

"We expect to have announcements on that in the next week," he revealed.