Has Darling’s supertax hampered banks’ pledge to support small businesses?
Last week, the chancellor Alistair Darling and Lord Mandelson, the business secretary, met with representatives of global banks and financial institutions to discuss a new initiative aimed at helping small businesses in the UK.
The aim is to provide working capital and funds for investment in small and medium-sized businesses. Goldman Sachs and Deutsche Bank are among those being encouraged by the Government to contribute millions of pounds as part of the lending scheme.
According to the Financial Times, the banks have reportedly been asked to contribute ┬ú25m-┬ú35m each, which will form the new ‘National Investment Corporation’ and supply capital to UK SMEs.
However the discussions were held amid tensions between banks and the Government, which may further be hampered in the wake of Alistair Darling’s plans to impose a 50% ‘supertax’ on bankers’ bonuses.
In Alistair Darling’s annual pre-budget report released last week, he announced his intention to impose the tax immediately, in an attempt to curb bank bonuses that has caused public outcry over recent months.
The result is a furious backlash from UK financial institutions that could not only seriously disrupt the relationship between banks and the Government, but encourage bankers to move abroad to escape the tax levy.
One investment banking chief told the Financial Times that the “contract between government and business is broken”, while a senior Wall Street banker said: “I can’t tell you how many people have called me from London asking to move. The question all the banks have now is: who the hell wants to be in the UK? Some businesses will definitely leave.”
Darling’s move has also prompted support from French president Nicolas Sarkozy, who is backing the scheme and reportedly believes that a levy on bonuses “should be considered a priority”.
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