Pre-election Budget targets bailout banks

Britain's banks were told it is payback time as a series of measures were unveiled in the nation's Budget designed to force them to support the economic recovery and tackle financial exclusion.

Chancellor Alistair Darling also said £2 billion ($4.23 billion) had been raised through the 50 per cent one off "super tax" on bankers' bonuses over £25,000 - nearly four times his original forecast of £550 million.

The windfall will largely be spent on further measures to stimulate the economy and extra university places.

Darling also again signalled Britain's support for an international "risk tax" on banking transactions to build funds to prevent future government bailouts - but said Britain would not go it alone, as suggested by the Conservatives. He argued doing this could put thousands of jobs at risk across the country.

The Government pumped an estimated £1.2 trillion into the banking system to stave off a threatened meltdown at the height of the financial crisis.

Measures taken include the nationalisation of Northern Rock and Bradford & Bingley's mortgage business with big stakes taken in Royal Bank of Scotland and Lloyds Banking Group.

Even banks which did not take direct state aid - such as Barclays and HSBC - have benefited from Government actions such as the special liquidity scheme and economic stimulus measures.

But in his Budget speech, Darling said: "We will sell our shares in RBS and Lloyds as well as Northern Rock in a way that maximises value for the taxpayer and recoups the money we invested. We intend to get all the taxpayer's money back. The Treasury has already received £8 billion in fees and charges in return for support."

He said "unbanked" Britons will also be given a new right to open no-frills "basic" bank accounts while banks could be forced to provide money to improve the availability of affordable credit to poorer families through a "community levy".

Royal Bank of Scotland and Lloyds have also been told to lend £105 billion to homebuyers and businesses over the next year, of which £41 billion must be lent to small businesses. If they fail to meet the targets, the executives responsible could have their bonuses docked.

The Government said UK Financial Investments, which manages the taxpayer's holdings in banks, would "work with" banks' remuneration committees to penalise responsible directors.

However, the business target is a gross lending figure rather than a net figure, and the two companies said it was close to what they lent last year anyway.

Darling said he would consult on measures to give shareholders more power over executive pay at banks, and further review their pay policies to assess whether they are detrimental to consumers and the economy. "There can be no return to business as usual for the banks".

Reacting to the measures, Angela Knight, chief executive of the British Bankers' Association, said: "This was a Budget with an eye on the ballot box".

FINANCE FOCUS

Plans outlined in Britain's Budget:

* Support for international "risk tax" on banking transactions.
* Sell shares in RBS, Lloyds and Northern Rock to recover taxpayer money.
* Introduction of no-frills "basic" bank accounts.
* Royal Bank of Scotland and Lloyds told to lend £105 billion to home buyers and businesses over the next year, of which £41 billion must be lent to small businesses.
* Consult on measures to give shareholders more power over executive pay at banks.

- INDEPENDENT