The chairman of the Treasury select committee has written to the chief executive of the PRA to express concerns that a new banking tax will stifle competition.
Andrew Tyrie has written to Andrew Bailey about the bank corporation tax surcharge which was announced by the chancellor in his Summer Budget.
The measure imposes a surcharge of 8 per cent on the profits of banking companies, but has proven to be controversial – especially among larger building societies, which, according to Mr Tyrie, are saying the surcharge will affect their ability to lend for mortgages.
Mr Tyrie said: “Millions of consumers and small businesses have been getting a poor deal for decades because of inadequate competition and choice in banking.
“It is essential that the surcharge does not obstruct parliament’s efforts over the past four years to increase competition in the banking sector.
“The committee will want an assurance from the PRA that it has assessed its effect on competition in the retail sector.”
The surcharge will be levied on profits of banking companies in accounting periods beginning on or after 1 January 2016.
Right to reply
The Summer Budget said: “This means that banks’ contributions will be increasingly aligned with profit and capital accumulation, reducing the risk of tax constraining lending or influencing banks’ decisions on the location of internationally mobile activities. It also means that banks’ contributions will be increasingly linked to activities within the UK, helping to reduce the impact of tax on the competitiveness of UK banks’ overseas operations and helping to reflect the ongoing impact of regulatory reform and resolution planning in reducing the risk of these operations to the UK economy.”