Osborne to crackdown on bankers’ bonuses

UK chancellor of exchequer, George Osborne, is "now examining" further taxes on the UK's banks, apparently in a bid to bring about higher retention of banks' earnings, more lending to businesses and restraining what promises to be another bonus bonanza season in the City.

In Washington for his first IMF meeting, Obsorne lent support to calls from the US, for those countries with undervalued exchange rates, most notably China to bring their currencies in line with market forces.

Osborne said talks in the EU about a ''financial activities tax", were gaining pace and the tone of the response from EU colleagues was "quite encouraging". The "FAT" would be a tax on the banks profits and the bonuses they pay out, rather than the "Tobin tax", a levy on transactions being pushed by the "Robin Hood Tax" campaign.

However, according to analysts, given that the bank levy had already been announced in the budget, it represented a radical change in the way the financial services sector was treated by the British government, after years when it was granted a special privileged status in policy-making – symbolised in its long-term exemption from VAT and "light touch" regulation.

Osborne said, the banks would do well to heed the warning in his speech at the Conservative conference that payment of lavish bonuses would not be tolerated. He added the banks had been warned both publicly and privately about the governments' concerns.

The next bank bonus season is to begin next January and February, and it would surely irk ministers that City traders pull in multi-million pound bonuses and the hardships are being endured in the "real economy" with many facing the prospect of losing their child benefit, housing benefit and a VAT hike to 20 per cent.