The banking industry today warned the Treasury that plans for a “supertax” on bankers’ bonuses would damage the City’s reputation as a financial centre and risk an exodus of companies abroad.
Angela Knight, the chief executive of the British Bankers’ Association (BBA), said: “We need to think not just about the individuals but about the business that will be done elsewhere.
“We need to think about the message this will send outside the UK about Britain being a place to do business in.”
It emerged at the weekend that Alistair Darling is preparing to introduce a punitive new tax on bankers’ bonuses in his Pre-Budget Report on Wednesday.
He is expected to argue that because billions of pounds of public cash has been used to bail out the financial sector, taxpayers have a right to a larger share of bankers’ payouts.
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Another idea being mooted is that banks would be forced to make higher employer National Insurance contributions.
Condemning the plans, Ms Knight pointed out that the banking industry generated significant jobs and taxes for the UK. It supports one million jobs and the financial services sector generates £12.5 billion in corporation tax and £18 billion in personal taxes each year, she said.
She said that it was a “populist” measure aimed at boosting the Government’s popularity. “In a tight fight for a general election you are going to take your opportunity.”
She also questioned the “practicality” of such a measure — a view that several leading accountants have already expressed. They have said that such a move could breach human rights.
Ms Knight added: “The banking industry did not cause a housing bubble, it wasn’t the one setting monetary policy and it wasn’t in charge of the regulator.”
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The plans will exacerbate an already growing rift between the Treasury and the banking industry.
Last week, Royal Bank of Scotland, which is soon to be 83 per cent-owned by the British taxpayer, was accused of holding taxpayers to ransom after its board threatened to resign en masse if the Treasury blocked huge bonus payments.
The Treasury has demanded a veto on the bank’s estimated £1.5 billion bonus pool for staff at the group’s investment arm. The pool is about 50 per cent bigger than last year and would give 20,000 bankers the equivalent of three times the national average salary each.