Finance and Economic

World governments should consider urgently a levy on banks to fund future bailouts, British Prime Minister Gordon Brown said on Saturday, departing from London’s longstanding resistance to a global tax.

France and Germany have led the way in Europe in seeking to force the financial sector to return some of the billions of public money plowed into banks over a year of crisis.

A global levy would be hard if not impossible without U.S. backing, a country traditionally hostile to new taxes. U.S. officials declined comment on Brown’s proposal before a later news conference by U.S. Treasury Secretary Timothy Geithner.

London to date had also resisted, mindful of the interests of its powerful financial services industry, which generates a large proportion of Britain’s tax revenues.

“We should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society,” Brown told a meeting of financial policymakers from the G20 nations in Scotland.

“There have been proposals for an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global transaction levy,” he said.

Brown said any measure would have to be global in nature and implemented by all the world’s main financial centers in the United States, Europe, Asia, Middle East and Switzerland.

In recent Congressional testimony, U.S. Treasury Secretary Timothy Geithner was cool to an idea from a domestic regulator who called for big financial firms to pay risk-based assessments into a fund that would be available for use if they hit trouble.

Geithner opposed pre-funding bank bailouts on the basis that it make banks less wary of risk taking.

Britain this week forked out another 30 billion pounds on bailing out two of its biggest banks for the second time, and opinion polls all show Brown heading for defeat at the hands of opposition conservatives in next year’s election.

IMF REVIEW

Brown said the International Monetary Fund would review the possibility of a global transaction tax and report back in April next year — signaling the G20 had agreed as a group to take up the matter more seriously.

“I do not in any way underestimate the enormous and difficult practical and technical issues that will need to be overcome that a globally cohesive system requires and raises.

“But I do not think these issues should prevent us from considering with urgency the legitimate issues I have discussed,” he said.

Banks have already warned the G20 that if they have to meet new higher capital charges too soon, they will have less money left to lend and aid recovery. 

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