Chancellor George Osborne is to raise some £2.5bn from a new tax on the banks, with the aim of generating the "maximum sustainable revenue".
But Lord Myners, a former city minister, warned that banks would not absorb the tax themselves.
"They will pass the charge of this tax onto their customers," he told Evan Davis.
"The customers who will bear it will be the small businesses and private individuals who cannot move their business elsewhere."
"It is a poorly thought through tax which is trying to achieve a number of things and is pretty much failing on every front".
Andrew Tyrie MP, of the Treasury Select Committee, warned that the banks would continue to raise massive profits as long as there was a small number of banks in the UK.
"We have got to have more competition in the market," he said.
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