Bank levy to rise ahead of the Budget

The Chancellor, George Osborne has said that the levy charged on bank profits is to rise by an extra £800 million this year.

This will take the amount of tax to £2.5 billion, and the levy is to set to become permanent.

Changes to the levy were due to have been made public in the Budget, set for 23 March.

But the Chancellor said that stronger than expected performances from the banks had encouraged him to increase the levy now rather than wait until March.

The initial rate, introduced last June, was 0.05 per cent of profits. From 1 March, the rate will climb to 0.1 per cent for two months, in order to balance the lower rate charged in the first two months of the year, before falling back to 0.075 per cent.

Mr Osborne added that he wanted the banks to be aware of the change as soon as possible so that negotiations with them over small business lending could be conducted in "good faith".

Talks on a deal with the banks to boost business lending and to limit bonus payments are as yet ongoing.

Project Merlin, as the discussions have been termed, reached an impasse last month.

In a BBC radio interview, Mr Osborne said of the negotiations: "What really matters is if we get a measurable and significant increase in lending to small and medium-sized businesses.

"That's what people will want to look at when we conclude a deal, if we conclude a deal."