Britain's banks were locked in talks with the government tonight as they fought to ensure that the multimillion-pound pay deals of the City's top speculators will not be made public.

As the chancellor, George Osborne, said months of talks between the banks and the government over lending and bonuses were all but complete, it emerged that any information revealed about highly paid bankers could be strictly limited.

Under the terms of the deal being thrashed out, the banks would need to provide pay details about only about five to 10 executive managers. This is likely to exclude the highest paid traders and deal makers inside the banks, who are often not senior managers.

Even so, the coalition will attempt to take credit for having extracted more information on pay than might have been expected when Osborne ditched the so-called Walker rules that demanded all pay deals over £1m be published. Treasury sources were saying that the rules would apply to those making executive decisions – as is the case in other jurisdictions around the world.

The talks continued despite Osborne's surprise announcement at breakfast time on Tuesday that he was going to increase the bank levy to £2.5bn this year. He had initially expected to receive £1.7bn in 2011 before hitting his £2.5bn target in subsequent years. In the City there was speculation that Osborne had suddenly imposed the additional £800m on the banks as the government had extracted very little from the industry, despite months of negotiations over getting banks to lend £190bn to businesses.

Investors were unconcerned by the extra tax and bank shares rose on the day.

Whitehall sources insisted that progress had been made on the issue of bonuses; a £2.3m bonus for outgoing Lloyds Banking Group chief executive Eric Daniels was being negotiated down to £1.4m, while Royal Bank of Scotland's attempts to pay cash bonuses to its bankers for the first time since its bailout appear to have been halted. Treasury officials said a deal over the so-called Project Merlin talks would be reached in the "next week" after Osborne's surprise news on the bank levy.

The shadow chancellor, Ed Balls, said Osborne's announcement was "hurried and panicky". He said banks would be paying less tax than they did last year – because Labour had imposed a £3.5bn bonus tax and the coalition was cutting corporation tax.

In his first scheduled Commons exchange with the new shadow chancellor, Osborne attacked Balls for his time in the Treasury as City minister.

Calling Balls a "deficit denier", Osborne said: "We have had to deal with his economic legacy". Balls was the City minister who knighted former Royal Bank of Scotland boss Sir Fred Goodwin, he said.

The Unite union dismissed the levy as a "pittance" and "political gesturing". TUC general secretary Brendan Barber said: "This levy is pathetically small compared to the amount UK taxpayers are owed for the financial crash and barely covers the cost of the corporation tax cut the chancellor is giving the banks".

Pressure was still being exerted on the banks by Lord Oakeshott, the Liberal Democrat peer, who seized upon remarks by communities minister Eric Pickles, who wants the pay of any public servant over £58,000 to be revealed.

Oakeshott said: "We can't have Mr Pickles deciding public sector fat cats start at £58,000 and then hide hundreds of public-sector bankers we pay over a million."

He also urged disclosure of top pay not just within the bailed-out banks but across the wider banking sector, where the highest paid staff no longer sit on boards.

"Banks must make full disclosure of the top earners off the board in exactly the same way as board members," he said.

Treasury official Tom Scholar defended pay deals to a select committee. "If we want to sell our shareholding and make a decent return on it, we need top quality management ... because of the market in which these people operate, I am afraid we have to pay them more than the prime minister's salary."

While the opposition believes the bank levy is too tame, it irritates senior bankers.

HSBC's chairman, Douglas Flint, last week described it as a "location tax", and City experts expressed concern about the impact on London. Philip Booth, of the Institute of Economic Affairs, said: "Financial services are something this country has successfully specialised in – it is something we are good at – and further seeking to penalise it for political gain is dangerous."