The Government initially announced that a reduced rate of 0.05 per cent would apply in 2011, recognising the uncertain market conditions prevailing at the time. The Government no longer considers this necessary. Therefore, from 1 March the rate of the levy will be 0.1 per cent for 2 months, to offset the lower rate of 0.05 per cent charged in January and February, before moving to 0.075 per cent.

The Bank of England recently noted that the near-term outlook and resilience of the UK banking sector has improved (Financial Stability Report, Bank of England, 17 December 2010). Markets also now have certainty over the timing and direction of regulatory change, with the Basel III regulatory reforms not being introduced until 2013 at the earliest and including extended transition periods.

This increase in the rate of the levy will mean that it raises £2.5 billion in 2011, the same as the target revenue for future years. Previously the 2011 yield was forecast to be £1.7 billion. Business Secretary Vince Cable has confirmed that the bank levy will raise an estimated £10bn during the course of this parliament.

The Financial Times reported that the coalition was confident banks would provide £1.3bn over three years to parts of the UK hardest hit by spending cuts, on top of the £1.5bn Business Growth Fund which the banks announced in the autumn.

Bank bosses argue that lending targets for what might be weaker businesses could breach rules that say any decision should be in the best interest of shareholders.

Speaking on the BBC Radio 4's Today programme, Mr Osborne said: "What really matters is if we get a measurable and significant increase in lending to small and medium-sized businesses.