The day after George Osborne announced swingeing cuts to public services and welfare benefits, the government was expected to announce payback time for Britain's banks – blamed by many for the country's parlous economic state.

But despite unveiling details of a levy on bank balance sheets, the government was yesterday accused of "going soft" on the banks with a charge that would raise no more than £2.5bn from the industry.

The plan for the levy outlined by City minister Mark Hoban yesterday did not appear to match Osborne's promise on Wednesday to extract "the maximum sustainable tax revenues from financial services".

Instead, the plan bears the hallmark of a summer of intense lobbying by the industry, prosperous again after being bailed out by the taxpayer two years ago, and which has succeeded in winning important concessions from the government.

Analysts even predicted banks might pay less tax than originally expected as the government would need to adjust the levy to ensure it did not raise more than the £2.5bn targeted by the Treasury.

The Treasury spent the summer consulting on a levy that would consist of a charge of 0.04% of a bank's total balance sheet in the first year rising to 0.07% to recoup the targeted £2.5bn by 2013-14.

But today it conceded that it was yet to agree on the actual rate at which the levy would be imposed.

Another concession concerns the point at which banks start paying the levy. The original proposals set out that banks with liabilities exceeding £20bn had to pay the tax on the whole of their balance sheet. But yesterday it was revealed that the banks have been given a £20bn allowance below which they will not be taxed.

The Treasury is also cutting the levy rate on uninsured customer deposits, while the definition of a "banking group" has been altered to ensure that insurance companies and similar groups are not caught up in the levy.

Unions were swift to attack the plans, dismissing it as "a pathetically small amount" to demand from the banks.

The banks were also warned by the head of the employers' body, the CBI, that they faced "political consequences" if they pressed ahead with big bonuses at a time when public sector workers were facing job cuts and pay freezes.

"Banks are going to have to be very, very sensitive in the coming months. If they just press ahead with substantial bonuses at a time when public sector workers are being laid off, there will be political consequences. They will be soaked in some way," Richard Lambert, the CBI chief, said.

Labour MP Chuka Umunna, who sits on the Treasury select committee, criticised the government for "going soft" on the banks and having a lack of ambition on the bank levy. "In the spending review, there were no new measures to ensure that those who caused the crisis pay their fair share towards paying down the deficit and the draft bank levy legislation published today falls far short of the decisive action we need and is an insult to those losing benefits and local services", he said.

Hoban insisted the government wanted the banks to "make a full and fair contribution in respect of the potential risks they pose to the UK financial system and wider economy." He stressed the government was also looking at a financial activities tax in conjunction with other countries.

He added: "The levy has been designed to encourage less risky funding and complements the wider agenda to improve regulatory standards and enhance financial stability. It will apply to the global balance sheets of UK banks, and the UK operations of banks from other countries."

When the levy was first floated in June's emergency budget, analysts calculated that a planned cut in corporation tax to 24% from 28% would negate the impact of the levy and that some banks, such as state-backed Lloyds Banking Group and Royal Bank of Scotland, could actually stand to gain from the tax changes.

The Treasury was adamant last night that this would not be the impact at an industry level and produced figures that showed, for instance, in 2014-15, the corporation tax costs being £0.4bn, compared with a bank levy yield of £2.4bn.

The original proposals were amended after the government received responses from 48 interested parties during the summer. However, the revised version was still met with warnings by several parties yesterday that it would drive business away from the UK.

Rod Roman, tax partner at Ernst & Young, said: "While the chancellor aims to achieve a simultaneous reduction in bank risk and an increase in tax revenue, he may find, at least as far as the levy is concerned, he only gets one effect: a reduction in bank risk as certain types of banking business increasingly get done outside of London and outside of UK headquartered banks".

Kevin Cummings, tax partner at Berwin Leighton Paisner, said: "Whilst today's draft legislation is certainly less draconian than was first feared … the UK banking sector will remain discouraged by the Treasury's rush to push through the levy ahead of most of the UK's international competitors in financial services."