Britain's opposition Conservatives would introduce a unilateral tax on banks similar to that planned by US President Barack Obama if they win the upcoming election, leader David Cameron said on Saturday.
Prime Minister Gordon Brown's Labour government is expected to outline in next Wednesday's budget a global tax on investment banks as its preferred option for clawing back some of the billions of dollars of state funds swallowed up by the banking sector bailout.
The budget is expected to rule out creating an insurance fund against future failure. The government has said any levy on banks would need international agreement to prevent an exodus from the City of London, but the Conservatives said they would push ahead without support from other countries.
"A Conservative government will introduce a new bank levy to pay back taxpayers for the support they gave and to protect them in the future," said Cameron, whose party is leading polls ahead of a national election expected in May. "It won't be popular in every part of the City. But I believe it's fair and it's necessary," he said in a speech in south London.
Cameron said the plans would echo those of Obama, who in January put forward proposals for a 0.15 percent tax on the liabilities of big financial institutions. The level at which a British tax was set would depend on the scale of international agreement for a levy, a Conservative spokesman said.
"We had the biggest bank bailout in the world. We can't just carry on as if nothing happened," Cameron said. "In America, President Obama has said he will get taxpayers back every cent they put in. Why should it be any different here?" Both Britain's major parties are looking at how to recover money from financial institutions that benefited from huge bailouts during the financial crisis. Britain was forced to use taxpayer money to buy large stakes in both RBS and Lloyds.
Labour said it was committed to an international deal and the party's election co-ordinator Douglas Alexander accused Cameron of making up his policy "on the back of a fag packet". "We are part of a global banking system that's why the Chancellor of the Exchequer (finance minister) has been leading international negotiations along with the prime minister for co-ordinated international action," Alexander told Sky News.
Finance minister Alistair Darling is also expected to say in the March 24 budget that money raised by any levy should go to national governments, instead of into an insurance scheme. This would discourage banks from taking future risks and also help Britain address its record budget deficit. "The banks may prefer an insurance fund. But in many ways it would be a free pass, entitling them to free help when things go wrong and encouraging them to take risks," a government official said. Options for the levy include taxing a bank's liabilities, measuring risk-weighted assets or trying to tailor a scheme for individual institutions.
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