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Scandal-hit banks are let off lightly [Daily Mail, London]

By James Salmon, Daily Mail, London McClatchy-Tribune Information Services

Dec. 06--BRITAIN'S scandal-hit banks are expected to pay just pounds sterling 1.8bn to atone for past sins this year -- roughly half the tax paid by wine drinkers every year.

Yesterday the independent Office for Budget Responsibility admitted it expects a pounds sterling 400m shortfall in the Government's coffers, after predicting the bank levy would raise pounds sterling 2.2bn in March's Budget.

The Chancellor responded yesterday by hiking the rate by 24pc in a bid to hit its annual target of pounds sterling 2.5bn.

The disappointing forecasts from the OBR come as the Government's Autumn Statement underlined the damage banks have inflicted on the country's ailing economy.

It revealed that it has finally moved bailed-out lenders Bradford & Bingley and Northern Rock Asset Management onto its balance sheet.

This has caused the public sector's debt to spiral by pounds sterling 70bn.

In an accounting quirk, the Government had previously been allowed to class the toxic loans made by the two state-backed lenders as assets, flattering the nation's accounts.

Northern Rock Asset Management has been nicknamed the "bad" part of the North East lender.

The "good" part was sold to Sir Richard Branson's Virgin Money.

The levy on the balance sheets of Britain's biggest lenders was introduced last year to ensure they give back to society in the wake of the financial crisis.

But lenders including RBS and Lloyds have been shrinking their balance sheets, selling off non-core parts of their business.

The tax take is also under threat as stricter regulations discourage banks from taking part in more risky, but potentially highly profitable, activities.

The Chancellor yesterday revealed the bank levy will be hiked from 0.105pc to 0.130pc next month to ensure banks do not benefit from the fall in corporation tax, which will be slashed by a further percentage point to 21pc from April 2014.

The bank levy increase, which is expected to raise more than pounds sterling 500m extra a year, is designed to ensure the Government remains on track to hit its pounds sterling 2.5bn target. It is expected to raise pounds sterling 2.8bn next year.

But critics described the figure as a "drop in the ocean."

Lord Oakeshott, the Liberal Democrat peer, said: "The bank levy is worth having but it is a drop in the ocean compared with the pounds sterling 45bn we had to pump into RBS.

"We must make this zombie bank lend again, or business will struggle, GDP will fall and the deficit will rise."

Figures in the City criticised the tax hike, accusing the Government of "chasing its own tail."

Tom Aston, financial services tax partner at accountants KPMG, said: 'This is the fifth successive increase in the bank levy in two years -- probably some kind of tax record."

He added: 'News of the increase will be wearyingly familiar for banks, and is an alarming symptom of how rapidly banks' balance sheets are shrinking.

"There is an element of the Government chasing its own tail at each Budget and Autumn Statement in order to ensure that the bank levy yield still meets the magic pounds sterling 2.5bn figure."

Successful banks such as HSBC and Standard Chartered have complained that the bank levy favours rivals such as Lloyds and RBS which have been bailed out by taxpayers and are cutting down their balance sheets rather than expanding.

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