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10 December 2009
Chancellor (Finance Minister) Alistair Darling has announced the immediate introduction of a new one-off tax on bank bonuses in an attempt to stop banks using profits to pay large bonuses to bankers, The Guardian Reports.
The so-called 'bank payroll tax' on bonuses of more than 25,000 Pounds will have to be paid by the banks rather than the employees and will apply to bonuses awarded between 9 December 2009 and 5 April 2010.
The Chancellor said "there are some banks, which still believe their priority is to pay substantial bonuses to some already highly 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 back money for the taxpayer."
The National Audit Office has calculated that last year's bank bailout is costing the taxpayer 850 billion Pounds.
Ben Barrat at recruitment firm Alexander Mann Solutions, said "banks are already increasing salaries by 30% to 40% to retain staff and might now begin to offer more share options and other benefits instead of straightforward cash bonuses."
Mr. Barrat expects the bailed out banks to suffer most. "Banks know that by investing in executive recruitment now, they can give themselves a big competitive advantage in the new year and so I would expect to see significant numbers of people recruited from the bailed out and underperforming banks over the next year."
"Workers in the City tend to have a very good idea of what is going on in other businesses and they know that at the moment there is a good chance that the grass is greener elsewhere," Barrat added.