Bank profit tax to be permanent

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Chancellor George Osborne has announced that he is making the levy on bank profits permanent, raising an extra £800 million this year and £2.5 billion every year.

He said he wanted to make sure "banks make a fair contribution to closing the deficit".

But Mr Osborne conceded he had not yet struck a deal on limiting bankers' bonuses - saying he hoped that making the tax position plain would aid the prospects of a deal.

Mr Osborne has denied his move was politically motivated, saying: "No, it's economics and the need to make sure the banks make a fair contribution to closing the budget deficit.

He went on: "I'm still confident we can secure a deal with the banks on seeing an increase in lending to small businesses and see that bonuses are lower this year than last year."

The Chancellor said he was originally going to phase the levy in, but banks are in a healthier position than had been thought.

"We can move more quickly to the full rate and that's exactly what I have just announced," he said.