Some will argue against raising the bank levy but a raid on banks is popular before an election

Levy rising: Raid on banks is popular before election. Credit: PA

With the final Budget of this parliament due to be announced today, ITV News understands that the Chancellor will include an increase in the levy on banksamong his package of measures.

Business Editor Joel Hills explains why that could well be a popular move with just 50 days to go until the election.

The Bank Levy was introduced in 2011 as a way to raise money but also to discourage banks from the sort of risky, short-term borrowing that got them and the rest of us into so much trouble in the run up to the financial crisis.

The tax is permanent and is levied, not on profits or bonuses but on balance sheets - the debt that banks have on their books.

The first £20 billion of borrowing is exempt, as are ordinary retail deposits which are guaranteed by government debt.

The rate was set at 0.05% but has gone up eight times since, the Chancellor will put it up again, above the current rate of 0.156%.

The changes will mean that in the years to come the Bank Levy raises more than £3 billion a year for the Treasury.

In practice, it may not prove that effective.

An original target of £2.5 billion a year was set. To-date Bank Levy has raised substantially less (£1.6 billion in 2011/12 and 2012/13 and £2.2 bn in 2013/14) as bank balance sheets have shrunk faster than anticipated.

The bigger banks will throw their hands up to the sky.

Barclays and HSBC will be particularly unhappy, they are disproportionately affected on account of the size of both their investment banks and their global reach.

HSBC has handed over £2 billion in last two years.

Three quarters of the bank levy is paid by our five biggest banks.

Financially they will probably take this in their stride, as the economy recovers so our banking sector looks healthier and more profitable, even Royal Bank of Scotland, albeit on an underlying basis.

But the banks will argue that his tax merely restricts their ability to compete and damages London's reputation as a financial centre but they also know that an election is weeks away and that a tax raid on banks will be popular.