shaping the new financial architecture…

11 Downing Street

Posted in Uncategorized by Kitty on December 10, 2009

Pre-Budget Report statement to the House of Commons, delivered by the Rt Hon Alistair Darling MP, Chancellor of the Exchequer…

~~~ “… I am determined that any tax increases will continue to be guided by our values of fairness and responsibility.

Mr Speaker, the banks last year made collective losses of £80bn in this country alone.

This would have been much higher without the unprecedented level of support from the taxpayer.

There is no bank which has not benefited, either directly or indirectly, from this help.

This should be a time for banks to rebuild their capital base and become stronger.

A tax on profits, as has been suggested, will prevent them from doing this.

So I have decided against a windfall tax.

However, there are some banks who still believe their priority is to pay substantial bonuses to their already high-paid staff.

Their priority should be to rebuild their financial strength and increase their lending.

So I am giving them a choice.

They can use their profits to build up their capital base.

But if they insist on paying substantial rewards, I am determined to claw money back for the taxpayer.

I have decided to introduce from today a special one-off levy of 50 per cent on any individual discretionary bonus above £25,000.

This will be paid by the bank not the bank employee. Anti-avoidance measures will be introduced with immediate effect.

High-paid bank staff will of course also have to pay, as usual, income tax at their top rate on any bonus they receive.

On a cautious assumption, which includes our expectation that some banks will rein back bonuses, this one-off levy is expected to yield £550m.

This additional money will be used to pay for the extra measures, already announced, like help for the young and older unemployed to get back into work.

Mr Speaker, under the existing rules, the highest earners benefit disproportionately. from tax relief on pensions.

At the moment, a quarter of all the money spent on pensions tax relief goes to the top 1 ½ per cent of earners.

To help to make this fairer, I announced in the Budget that we would reduce pension tax relief for people with incomes over £150,000.

I want do this as fairly as possible, and treat individuals the same regardless of whether they receive their pay as current salary or as a future pension benefit, and prevent avoidance.

So I have decided to include employer pension contributions in the definition of income for this tax measure…”~~~

To provide certainty, I will introduce a floor, so that irrespective of the size of employer pension contributions, no one with an income below £130,000 will be affected.

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