Britain's new coalition government will introduce a levy on banks under a major overhaul aimed at preventing another global financial crisis, according to a joint accord published today.
'The parties agree that reform to the banking system is essential to avoid a repeat of Labour's financial crisis, to promote a competitive economy, to sustain the recovery and to protect and sustain jobs,' the agreement between the new coalition of Conservatives and Liberal Democrats said.
'We agree that a banking levy will be introduced. We will seek a detailed agreement on implementation,' it added.
Britain's Conservative party, led by new Prime Minister David Cameron, has forged a coalition deal with the Liberal Democrats that ended 13 years of Labour Party rule.
The pair said they want to examine whether retail and investment banking divisions could be separated to lessen risk in the financial system. This was a key plank of the Liberal Democrat election manifesto.
'The parties wish to reduce systemic risk in the banking system and will establish an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way,' they said.
'While recognising that this would take time to get right, the commission will be given an initial time frame of one year to report,' the statement added.
The coalition will also seek to grant wider oversight powers to the Bank of England, overhauling the regulatory system under which the global financial crisis erupted in 2007.
The two political parties also said they would work towards increasing the level at which people began to pay income tax - eventually to £10,000 sterling compared with the current level of £6,475.
'The parties agree that the personal allowance for income tax should be increased in order to help lower and middle income earners. We also agree to a longer-term policy objective of further increasing the personal allowance to £10,000, making further real steps each year towards this objective,' the statement said.
Meanwhile, Britain's new coalition government has also cancelled controversial plans to build a third runway at London Heathrow airport.
As well as cancelling the expansion of Heathrow - the world's busiest international air hub - the new government said it would refuse any additional runways at London's other two main airports, Gatwick and Stansted.
The former Labour government reiterated its support for the construction of a third runway at Heathrow in its manifesto for the May 6 election, but the Conservatives and Liberal Democrats were opposed to the expansion plans.
Residents of the area of west London where Heathrow is situated strongly opposed the plans, fearing it will greatly increase the noise and pollution from planes.
