Commenting on Chancellor of the Exchequer George Osborne’s announcement today that the bank levy is to be increased with immediate effect, Prof Philip Booth, Editorial and Programme Director at the Institute of Economic Affairs, said:
“Increasing and extending this levy at this time is clearly a political decision – but it is bad economics. Financial services are something this country has successfully specialised in – it is something we are good at – and further seeking to penalise it for political gain is dangerous.
“The government has set up the Independent Commission on Banking for the purpose of creating mechanisms whereby banks can fail in an orderly fashion, without bringing the whole system down and requiring taxpayer bailout. Yet this increased levy is supposedly being imposed in order to contribute towards a potential future bailout – the very thing these mechanisms will guard against. The government's policy on this is completely incoherent.
“The government would do better focusing its efforts towards cutting regulation and red tape, and allowing growth to return to the economy, rather than creating further uncertainty in the banking and financial services industries.”