UK: the pre-budget report: tax, stock lending and a governance code for building societies

The chancellor delivered his pre-budget report (PBR) today and, as expected, announced the introduction of a temporary bank payroll tax of 50% on discretionary bonus payments over £ 25,000: see here for HMRC guidance and the draft legislation. The Government offered several justifications for the new tax: it was necessary until remuneration practices change as a result of corporate governance and regulatory reforms; evidence that some banks are proposing bonuses that are not consistent with a prudent approach to risk; and fairness: the tax representing a quid pro quo for taxpayer support of the banking sector. 

Of particular interest elsewhere in the report are the following announcements (at paras. 3.39 and 3.58):

The FSA has been reviewing the governance and risk management of stock lending in the market. The Government welcomes this work and will work with the FSA and market participants as necessary to help develop thinking in this area.

Following the Walker Review, and the subsequent Financial Reporting Council (FRC) consultation on the Combined Code, the Government proposes the introduction of a specific governance code for building societies and other financial mutuals. The Government will also consider the introduction of a regular independent review of building societies (and other financial mutuals) adherence to the Code".