UK government coalition partner seeks extra billion pounds in bank tax

By Kylie MacLellan LONDON (Reuters) - British banks would be charged an extra 1 billion pounds a year in corporate tax to help eliminate the budget deficit under plans announced on Monday by the government's junior coalition partner. The Liberal Democrats said they would push for the measure to be included in the Conservative-led government's final budget next month, but if it was not it then they would make it part of their campaign manifesto ahead of the May 7 national election. Both the Liberal Democrats and Prime Minister David Cameron's Conservatives have promised to balance the current budget, which covers day-to-day spending but not investment spending, by 2017/18, But they disagree over how to do so. The Conservatives favour making the 30 billion pounds of fiscal consolidation they say is required to meet that target by reducing government spending and clamping down on tax avoidance. The Liberal Democrats say tax rises should also be included. The supplementary tax charge would be set at 8 percent to offset cuts to corporate tax made by the government since 2010, would remain in place until the books have been balanced, the Liberal Democrats said. "Failings in the banking system were a major factor in the great crash of 2008. That is why we have always insisted that the banks help fund repairing the economy," said Liberal Democrat Danny Alexander, a junior finance minister. "The banking sector is now returning to health and profitability. So now is the right time to ask the sector to contribute a little more to help us balance the nation's books." The tax would be in addition to an existing bank levy, introduced in 2011 with the aim of ensuring banks made a fair contribution to the potential risks they pose to the financial system, which applies to the global balance sheet assets of British banks as well as assets belonging to the UK operations of foreign banks. The British Bankers' Association said the banking sector already made a major contribution in tax. "Banks in the UK already pay more tax than any other industry," a BBA spokesman said. "Introducing yet another tax on banks will not improve financial stability." (Additional reporting by Ankush Sharma in Bengaluru Editing by Jeremy Gaunt)