British government says will introduce bank levy

12th May 2010, Comments 0 comments

Britain's new coalition government will introduce a levy on banks under a major overhaul aimed at preventing another global financial crisis, according to a joint accord published Wednesday.

"The parties agree that reform to the banking system is essential to avoid a repeat of Labour's financial crisis, to promote a competitive economy, to sustain the recovery and to protect and sustain jobs," said the agreement between the new centre-right coalition of Conservatives and Liberal Democrats.

"We agree that a banking levy will be introduced. We will seek a detailed agreement on implementation."

Britain's Conservative party, led by new Prime Minister David Cameron, has forged a coalition deal with the Liberal Democrats that ended 13 years of Labour Party rule.

The pair said Wednesday that they would seek to examine whether retail and investment banking divisions could be separated to lessen risk in the financial system -- which was a key plank of the Liberal Democrat election manifesto.

"The parties wish to reduce systemic risk in the banking system and will establish an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way," they said

"While recognising that this would take time to get right, the commission will be given an initial time frame of one year to report."

The coalition will also seek to grant wider oversight powers to the Bank of England, overhauling the regulatory system under which the global financial crisis erupted in 2007.

"We agree to bring forward proposals to give the Bank of England control of macro-prudential regulation and oversight of micro-prudential regulation."

The two political parties also said they would work towards increasing the level at which people began to pay income tax -- eventually to 10,000 pounds (11,723 euros, 14,878 dollars) compared with the current level of 6,475 pounds.

"The parties agree that the personal allowance for income tax should be increased in order to help lower and middle income earners.

"We also agree to a longer-term policy objective of further increasing the personal allowance to 10,000 pounds, making further real steps each year towards this objective."

The coalition added that it would seek to link the basic state pension with average earnings from April 2011, instead of with the rate of inflation. The earnings link was scrapped in 1980 under Margaret Thatcher's Conservative government.

© 2010 AFP

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