Challenger banks have new ally over bank tax battle
MP Andrew Tyrie has now joined the campaign against the 8% tax, by asking the Bank of England  to review George Osborne's tax raid on the banks to make sure the smaller challenger banks will still be able to grow, and take on the big lenders. As we noted previously, challenger banks have been asking for the threshold for paying the tax to be hiked to profits of £250m per year, whilst building societies are demanding that mutual lenders be exempted from the tax altogether, since they are not to blame for the financial crisis.

Concerns: Andrew Tyrie, chairman of the Treasury Select Committee

George Osborne faces a growing rebellion over his new tax on banks after a senior Tory MP raised fears it could stifle competition and lead to a poorer deal for millions of customers.

Andrew Tyrie, chairman of the Treasury Select Committee, has asked for assurances from the Bank of England that the 8 per cent surcharge on UK profits will not penalise new challenger banks, enabling the biggest lenders to tighten their stranglehold on the market.

In a letter to Andrew Bailey, the boss of the Bank’s Prudential Regulation Authority, Tyrie asks: ‘In the PRA’s view, does the new corporation tax surcharge for banks make the retail banking sector more open to competition from new entrants, or does it further entrench the large incumbents?’

Bosses of a string of smaller lenders, including Virgin Money, Nationwide and Aldermore, have already railed against the new tax, which is set to come into force next year after being announced by the Chancellor in his July budget.