Osborne increases levy on banks to £2.5bn

The Chancellor, George Osborne, has said he is increasing the levy on banks to raise an extra £800m for the Exchequer. The tax on transactions was introduced in last year's Budget and was due to be phased in, but will now begin at the full rate.

The government has been trying to reach a deal with British banks to increase lending and to limit bonuses, but it has not be finalised.

Mr Osborne told the BBC he wanted to see banks making ''a fair contribution to Britain's economic recovery'',