LONDON—U.K. Chancellor Alistair Darling yesterday told Parliament in his pre-budget report that the government would impose an immediate one-time levy of 50 percent tax on bonuses of more than £25,000 ($40,800).
The tax will come into force immediately and would be paid for by the banks and financial institutions rather than the bankers. It was devised in order to discourage banks from awarding its employees large bonuses after the billions of pounds of taxpayers’ money were spent to bail out the banks earlier this year.
Angela Knight of the British Bankers Association (BBA) said in a statement, “This new tax has to be set in the context of commitments already made. The U.K.’s banks have already agreed to observe pay restraints where bonuses are mostly deferred and paid in shares. We are already well ahead of the other G20 countries in doing this.”
“Viewed from abroad, London may well look now like a significantly less attractive place to build a business,” she continued.
Business Secretary Peter Mandelson told GMTV that, “Nobody wants to drive banks and bankers away from the City of London, they’re important for our economy, but we’re seeing in some respects a return to the short-term bonus culture that got us into trouble in the past, so it’s reasonable for the chancellor to deliver a message to the banks.”
In the budget in April, Darling said the economy would shrink by 3.5 percent. Yesterday, he admitted the decline would be 4.75 percent, the worst since World War II.
Figures in the Treasury’s pre-budget report documents reveal that in 2014-15, the national debt will be £1.5 trillion ($2.39 trillion). That is 77.7 percent of the U.K.’s current GDP.
The debt currently stands at £798 billion ($1.29 trillion), or 55.6 percent of GDP and servicing the government’s growing debt will cost increasing amounts of money.
The U.K. chancellor set out plans to borrow almost £800 million ($1.29 trillion) over six years after the sharpest economic contraction in modern history inflicted more damage on the public finances.
The BBA, a trade organization of the U.K. banker sector, was concerned about the future of the industry.“We must repeat that only concerted international agreements will succeed in reforming remuneration in the financial sector,” the BBA said.
The tax will come into force immediately and would be paid for by the banks and financial institutions rather than the bankers. It was devised in order to discourage banks from awarding its employees large bonuses after the billions of pounds of taxpayers’ money were spent to bail out the banks earlier this year.
Angela Knight of the British Bankers Association (BBA) said in a statement, “This new tax has to be set in the context of commitments already made. The U.K.’s banks have already agreed to observe pay restraints where bonuses are mostly deferred and paid in shares. We are already well ahead of the other G20 countries in doing this.”
“Viewed from abroad, London may well look now like a significantly less attractive place to build a business,” she continued.
Business Secretary Peter Mandelson told GMTV that, “Nobody wants to drive banks and bankers away from the City of London, they’re important for our economy, but we’re seeing in some respects a return to the short-term bonus culture that got us into trouble in the past, so it’s reasonable for the chancellor to deliver a message to the banks.”
In the budget in April, Darling said the economy would shrink by 3.5 percent. Yesterday, he admitted the decline would be 4.75 percent, the worst since World War II.
Figures in the Treasury’s pre-budget report documents reveal that in 2014-15, the national debt will be £1.5 trillion ($2.39 trillion). That is 77.7 percent of the U.K.’s current GDP.
The debt currently stands at £798 billion ($1.29 trillion), or 55.6 percent of GDP and servicing the government’s growing debt will cost increasing amounts of money.
The U.K. chancellor set out plans to borrow almost £800 million ($1.29 trillion) over six years after the sharpest economic contraction in modern history inflicted more damage on the public finances.
The BBA, a trade organization of the U.K. banker sector, was concerned about the future of the industry.“We must repeat that only concerted international agreements will succeed in reforming remuneration in the financial sector,” the BBA said.
