Darling plans windfall 'supertax'

Dec 9 2009

Alistair Darling is to announce a major raid on the City and plans to harvest more tax from the rest of the public today, as he delivers his crunch Pre-Budget Report.

The Chancellor is expected to unveil a series of measures designed to raise revenue as he admits that the Government's finances are in even worse condition than previously thought.

The centrepiece of the package will be the widely-leaked proposals for a one-off windfall "supertax" on banks' bonus pools, intended to recoup some of the billions of pounds spent shoring up the financial system.

But the Guardian reported that Downing Street would also risk further escalating tensions with the City by publishing a document outlining the case for a transaction tax on all trades.

The ideas have drawn a sharp response from the president of Barclays, Bob Diamond, who suggested they could lead to an exodus of talent.

According to the Independent, Mr Diamond told a conference in Sussex: "Both financial capital and human capital are extremely mobile. In terms of compensation it's great politics and it's great media. We don't feel that (a tax on bankers' bonuses) is supported by the principles that were adopted (by the G20)."

Alongside populist moves to hammer bankers, Mr Darling is expected to confirm that economic performance has been worse than thought this year and public borrowing will rise even higher than the previous estimate of £175 billion.

There is not likely to be much new information about departmental budgets, which are largely set until 2011, with the Government committed to maintaining spending.

But he will use the statement - his third as Chancellor - to give some more details of how he intends to meet the commitment in its Fiscal Responsibility Bill of halving the debt within four years.

Personal allowances are expected to be frozen, bringing thousands more into the higher rate of tax, and some analysts believe that he could signal future rises in VAT.