Government officials have admitted that the 50% bankers bonus tax announced in the Pre-Budget Report has failed because many banks plan to absorb the costs rather than reduce payouts.
Treasury insiders have said the tax had not succeeded in changing the behaviour of big banks, but added the Treasury was still set to gain millions of pounds from the tax just months before the election.
One government official told the Financial Times: “The general thrust is that the banks will pay the tax.”
Treasury insiders believe the levy on bonuses is now expected to raise a net figure of at least £1bn – nearly double the government’s initial estimates. But many bankers expect the tax to raise £4bn for the government.