Alistair Darling is preparing to introduce a punitive new tax on bankers’ bonuses in a Pre-Budget Report that will draw the battle lines for the next general election.
The Chancellor is expected to argue that, because billions of pounds of public cash was used to bail out the financial sector, taxpayers have a right to a larger share of bankers’ payouts.
Accountants expressed doubts over the practicality of such a tax, claiming that it could breach human rights.
Yesterday Mr Darling said that voters would expect “the broadest shoulders to bear the greatest burden” when it came to restoring the public finances. Although final details have yet to be agreed, it is understood that he has bowed to pressure from Gordon Brown and is considering a supertax on individual bankers who receive bonuses over a certain level.
John Whiting, tax partner with PricewaterhouseCoopers, said that it was unprecedented for a particular occupation to be targeted in this way. “This is difficult on several levels,” he said. “It smacks of discrimination.”
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Mike Warburton, tax director with Grant Thornton, said: “It’s misguided and extremely difficult to implement. We’ve got a successful financial services industry in this country and the Government seems intent on pulling it to pieces. It will encourage people to pack up shop and go overseas.”
Another idea being mooted is that banks would be forced to make higher employer National Insurance contributions.
A government source insisted that a windfall tax on profits was not on the table. “This is about speeding the change needed in the banks’ culture and underlining the message they’ve got to join the real world.”
George Osborne, the Shadow Chancellor, refused to rule out supporting a tax on bonuses, but said that he would prefer the Government to remove certain tax concessions from the banks.
Mr Brown will announce plans today to reduce Britain’s £175 billion deficit by cutting the costs of quangos, consultants and the Civil Service.