George Osborne's constant tinkering with bank taxation is creating "perverse" penalties for challenger banks and building societies, a shadow minister has claimed.
Alison McGovern said by 2020 the Chancellor would have changed the rate of bank levies 13 times in 10 years - a fact she dubbed "a mess".
She told the Commons the plans in July's Budget would hit new, small banks while sparing the old institutions behind the financial crisis.
Mr Osborne's plans cut the bank levy but introduced an 8% surcharge on bank's profits.
The shadow Treasury minister made her remarks during committee stage debate on the Finance Bill. Labour wants a review into banking taxes to establish the impact of the new measures.
Ms McGovern said: "These clauses will completely restructure the shape of banking taxes in the UK as the Government moves from a tax on bank balance sheets towards a tax on bank profits.
"It is our belief these changes have the potential to damage the competitiveness and diversity of our banking sector."
Ms McGovern said the new policy was at odds with policy over the last five years, which she said indicated banks should be taxed in relation to the economic risk they posed and not how much money they made.
She added: "Our main objection to the Government's new policy is the effect on competition in the banking sector and I am sure there is agreement across the whole House that a competitive banking sector is vital to the long-term health of our economy.
"The truth is the changes ... will directly harm small challenger banks and building societies who need to grow and provide competition to the bigger players.
"The big banks are compensated for the new surcharge by the fall in the levy whereas the small banks that didn't pay the levy are simply smacked with a new tax.
"We are left with the frankly perverse situation where small building societies will be paying the surcharge but large loss-making banks would not."
Ministers earlier saw off Opposition protests and grumbles on their own benches about Budget changes to the insurance premium tax and the climate change levy.
The Government won a series of Commons votes by comfortable margins.
Replying to Ms McGovern, Treasury minister Harriet Baldwin said challenger banks and building societies were paying the lowest tax rates in the G7.
Ms Baldwin stressed that 90% of building societies would be unaffected by the changes in the Bill.
She said: "As a result of the changes we are talking through here, it is in fact the case that the banking sector, even after these changes, will be paying the lowest rate of bank tax in the G7.
"You wouldn't believe from the remarks that we heard at the beginning either that over the 13 years that Ms McGovern's party was in power that there was no increase in terms of competition in banking.
"There were more than 20 inquiries into banking competitiveness but obviously they were unsuccessful."
Ms Baldwin added: "90% of building societies are unaffected by these changes and that is in fact the case.
"Obviously the vast majority of building societies do not make a profit of more than £25 million a year, so indeed they will benefit from the reduction in the corporation tax over the life of this Parliament, down to 18% by 2020 in what was announced."
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