Following the UK government’s 2013 budget announcement the consultancy firm Deloitte said the decision to increase the bank levy to 0.142% will make it harder for banks to lend to small business and consumers.
Wayne Weaver, UK banking tax leader at Deloitte, said: "The Chancellor’s decision to increase the Bank Levy to 0.142% from January 2014, represents a 61% increase since December 2012 and is almost double the rate that was initially proposed. This is the sixth time that the levy rate has been raised."
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According to Deloitte the rate increase is not unexpected as the revenue raised from the levy continues to fall short of expectations. As banks continue to shrink their balance sheets and improve their funding profile, their bank levy cost reduces, and this mitigates the effect of the higher rate.
The UK’s Office for Budget Responsibility forecast for revenue raised by the levy for the current year is £1.6bn compared with a target of £2.5bn.
Weaver added: "Banks are working hard to increase their capital reserves and the levy increase will make this work harder. The end result is that banks will be less able to increase lending. The Chancellor indicated that the additional costs will be offset by falls in corporation tax but many banks do not currently pay this because they are not making profits."
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