You're reading: British charities call for bank bonus tax to help fund them

Britain should tax bank bonuses and give the proceeds to charities to help cushion them from funding cuts that will hit elderly and disabled people, a leader of the charity sector said on Saturday.

Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations (ACEVO), representing 2,000 British charity leaders, said charities faced funding cuts of up to 5 billion pounds ($7.74 billion) over the next two to three years.

Local councils are cutting grants to charities as Prime Minister David Cameron’s coalition government slashes public spending to curb a budget deficit of more than 10 percent of national output.

"We are suggesting that this government needs to put a tax on the most recent bonuses in the City (banking sector) which some commentators are estimating at around 7 billion pounds," Bubb told Reuters.

He noted that a one-off tax on bank bonuses introduced by former finance minister Alistair Darling last year had raised more than three billion pounds.

"So if there was another one-off tax at 50 pence, that would bring in over three billion pounds which would go a long way to making up for the cuts that charities are going to be experiencing," he said.

"Otherwise the cuts … will hit the old, will hit the vulnerable, disabled people. That’s already happening," he said.

ACEVO wants the proceeds of a one-off bonus tax to be paid straight into the "Big Society Bank" that Britain’s coalition government plans to set up this year to support its goal of expanding the voluntary sector and encouraging people to take more responsibility for their lives.

The Big Society Bank is to be funded with money from dormant bank accounts and private investors.

"The problem is the dormant account money will only bring in initially something like 60 million (pounds) which is a drop in the ocean. Charities have already faced at least 500 million pounds of cuts already," Bubb said.

Bubb, who floated his idea in an interview with The Times on Saturday, said ACEVO was suggesting separate meetings with finance minister George Osborne and Deputy Prime Minister Nick Clegg to discuss the proposal.

The bonus issue has divided the eight-month-old coalition government with the smaller Liberal Democrats, led by Clegg, seen as more favourable to tougher action on bank bonuses than the dominant Conservatives are.

The coalition has not repeated the one-off bank bonus tax, instead imposing a levy on bank balance sheets that will raise 2.5 billion pounds a year when fully in place.

A Treasury spokeswoman had no comment on Bubb’s proposal, but said: "We think the bank levy is the best way forward".

Britain fell in line with the rest of the European Union last month in introducing the world’s toughest bank bonus curbs as politicians and the Bank of England stepped up pressure on lenders to rein in payouts.

The British Bankers’ Association has said the sector contributes chunky tax revenues to the Treasury and the country’s banks should not be put at a competitive disadvantage to rivals outside Europe.

There remains deep political and public anger in Britain at the scale of pay for bankers after taxpayers had to rescue some lenders from the brink of collapse two years ago. Many banks have bumped up base salaries in the face of tougher bonus rules.

Senior government ministers discussed "pay discipline" at a meeting with bank bosses in December.