Wednesday, the British Chancellor Alistair Darling imposed a special 50% tax on bankers' bonuses in his third pre-budget presentation before the parliament.
Effective from today, the Chancellor introduced a special one-off levy of 50% on any individual discretionary bonus above GBP 25,000. Darling added if the banks use their profits for paying bonuses, instead of using it to build up their capital basis, they will have to pay a large amount back to the taxpayer.
"This will be paid by the bank not the bank employee. Anti-avoidance measures will be introduced with immediate effect," Darling said. "High-paid bank staff will of course also have to pay, as usual, income tax at their top rate on any bonus they receive. On a cautious assumption, which includes our expectation that some banks will rein back bonuses, this one-off levy is expected to yield GBP 550 million.
Darling said the government expects the British economy to return to growth in the fourth quarter, though it is forecast to contract by 4.75% this year on a whole. Gross domestic product is likely to grow by between 1% and 1.5% during 2010.
He noted that unemployment will continue to rise for some time and hence, it would not be right to withdraw all support now for homeowners. Darling added that unemployment in the UK remains lower than in France, Canada, the United States and the euro area.
Moreover, Darling confirmed that VAT will return to 17.5% on January 1 as planned. Hence, consumer inflation will rise from 1.5% to around 3% early next year, before falling back. The Bank of England expects inflation to then fall below target and reach 1.5% by the end of next year.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.