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Bank levy likely to miss revenue target

18 March 2013

The amount of money raised by the bank levy is likely to be below forecast, according to Deloitte, the business advisory firm.

Wayne Weaver, UK banking tax leader at Deloitte, said:

“Banks already face a 2013 levy rate almost 50% higher than 2012, due to a previously announced increase that set the rate at 0.13% of chargeable equity and liabilities. The Office for Budget Responsibility (OBR) has forecast a yield of £1.8bn for the current year. We expect the yield to be close to that figure, based on our review of recently reported bank results, with more than half paid by the big four UK banks. This falls short of the Chancellor’s £2.5bn previous target.

“The OBR also forecast a bank levy yield for 2013/14 of £2.8bn. We predict that the actual yield will be below that target, despite the significantly increased levy rate. One of the bank levy’s original aims was to encourage banks to adopt less risky funding models. 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 Chancellor appears to have these choices:

  • to increase the levy rate again, which would be the sixth rate increase since it was first announced in 2010;
  • broaden the scope of the levy as part of the planned review this year of how it operates. For example, the Chancellor could include smaller banks as lenders with less than £20bn of chargeable liabilities pay no levy; or
  • accept the lower yield and highlight that the bank levy is achieving one of its original aims of helping to make banks less risky.”

End

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About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

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